All Forum Posts by: Colton Fairchild

@Chris Marshall Run the same scenario with this property but assume you purchase it for $400k or $450k w/ 20% down, or whatever LTV you want to use. Then see what it does to your overall return.

I am looking for some clarity on the fund management fee for syndication funds. Would love some insight from anyone who has reviewed multiple PPM's. 

- What is the fee most commonly based on? (i.e. called capital, assets under management, or income related)

- What is a typical % for the fund management fee and is it always annual?

- Does the fee stay the same throughout the life of the fund or does it decrease as initial capital is returned?

@Chris Marshall No, you wouldn't want to raise the entire $500k. This would kill any profit you intend to make because you have too much capital in a deal that isn't producing a ton of cash flow. Syndicators definitely use financing... not just bank financing either. There are many non-traditional lending options available. Don't get caught up on trying to start a syndication fund for one property though (the legal fees will be far too high). Just reach out to a RE attorney and explain what you are trying to do. 

You should ask your friends what type of return they would expect to make annually from a real estate investment. They might say 15% and now you know what your target is. If the property you are looking at doesn't meet that criteria then figure out what purchase price, rate, LTV, etc. you would need to get it for to work. If you can't get it to work no matter what you do then it is most likely not a solid investment.

I agree with @Tom S.

This specific deal you are talking about has a rather low ROI. Maybe your friends would be happy with that but I believe the majority of people would pass on this.

@Jingru Sui

15 - 40% for STR. Depends on the area though.

@Patrick Stager this depends on a lot of variables. 15% ROI can be great over a couple months but not necessarily 2 years, 3 years, etc.

Here’s some questions that come to mind:

- What strategy are you using?

- What is the hold time?

- How risky is the project?

- Is this person funding 100% of the project?

A 15% return sounds great to one person and bad to another. Before throwing out the number that you think, just ask them what type of return they are looking to get on their money.

@Kevin Young Roth IRA. Put the max contribution each year... currently it is $6,000 annually.

@Kim Lisa Taylor Thanks, Kim! Can’t wait to read this.

@David Bittorf You have the general idea correct... although be careful offering that much above asking price. They may very well accept the ask price of $400k. If you are dealing directly with the seller then mention that you don’t have to worry about agent fees.

Reach out to a local title company and explain to them what you want to do. They can help with the paperwork. I’d also recommend connecting with a RE attorney.

Most likely they are not going to want to extend payments over 360 months (the seller doesn’t want to think about it for that long). Instead, you might see 30 year amortization with a 10 year balloon or something similar.

@Michael P. You are assuming the crash will magically begin the day after you sell your property. What if the market doesn’t crash for another 3 or 4 years after selling your house... are you just going to rent that whole time when you planned to get your house back in 9 months?

Also, not every crash is going to be like 2008. That was a very extreme event. There is no data to support that your home value is going to drop all the way to $200k.