All Forum Posts by: Daniel Kurkowski

Hi Corey, I don't work/invest out there myself but I can reach in to my network and find you an investment focused agent from the area.  If you want to PM some info of what you're looking for I can put out a feeler and report back.

Hi Justin welcome to the Twin Cities market.  As a lot of others have mentioned, the multifamily has tightened up over the past couple years.  

My company is an investment focused brokerage that also does property management/hard money and are the highest rated investment firm in the Twin Cities.  

To combat the difficulties most agents are having tight now we have put together a few creative options to provide above market returns.

If you have any interest in connecting PM me.

Thanks!

Easiest way to get over that fear is to get a mentor to underwrite the deal.  Having a second set of eyes with more experience approving the deal with you will make you feel better and give you someone you want to avoid letting down.

If you are providing value for the lender and have a strong financial background I have had lenders stretch it to get the deal through underwriting.  

Thanks for all of the responses everyone!  I will reach out to a few of your privately to see if we can't have a more specific conversation about the model.

At the end of the day everything is negotiable but the simplest breakdown I can find is having the investor purchase the property and the operator purchase all furniture.  It is an asset that only has value to the operator and if they were to part ways, it would likely just be trash hauled by investor if left behind.  That said some improvements like appliances, electronic locks, etc, could definitely be factored into the investor's purchase price if it is also reflected in their return.

The idea is that the investor gets a set return and the operator makes anything above that rent amount.  The investor gets a good return on the property and doesn't get to share in increased profits because their risk is static, just like the return.  

Most investors I work with don't care if their return could be higher dealing with Air BNB themselves.  There is the potential for more risk (especially upfront) and more hassle to deal with.  If you have $500k to spend you don't often have time to meet guests during the day etc. and don't want to deal with $15/hr problems.

The initial idea is to middle these transactions because I don't feel I have the requisite experience to put the management infrastructure in place for this medium, but have offers in on properties right now to learn more about what we would need to do as a company to set this up.  If we are able to do this, we would look to employ the same model of a set rent amount secured by our real estate assets and businesses.

I am working with an attorney to draft a standard lease document that is fair to both sides that we can use as a template so there shouldn't be any need for attorney's fees.  We are doing the leasing like a commercial lease and charging a total of 4% (2% operator/2% investor) of the gross lease amount (super low IMO and likely to change in the future) for putting all of this together and can also collect a brokerage commission when applicable.

The CD angle would be so dependent on the individuals profile but I have access to 10-15 deals a year as it is with minimum terms of 10% down, 5% increase in resale price per year of term, 7.5% interest with all of my closing fees covered by the CD buyer with a 2 year max.  It is hard to do worse than that unless there is a compelling reason to deviate based on the strength of the borrower due to some cross-collateralization, or if the underlying property has a lot of inherent value to the investor.

Hey dude! Surprisingly the investor component has been the easiest part and I have $5mm ready to deploy for this if needed between a few different investors who are super stoked to get into the better neighborhoods in the area at an 8% cap rate. Not needing third party property management is a great efficiency that has a significant effect on NOI for most of the investors in my network.

The challenge I am finding is to locate skilled Air BNB hosts.  It is not a circle I run in right now and there is a tendency to attract people who would be pretty difficult for me to underwrite for one of my clients based on their financial background/ability to follow instructions in terms of putting together a financial statement or showing up on time.  lol

Much it would seem is predicated on the strength of the host and while I would prefer to set all of these up as CFDs (I do a lot of CFD deals for my own investing), the down payment makes it unpalatable for some of the hosts. Perhaps with a smaller down payment of like 5% or something it could work for the right people.

Yes it can certainly be structured that way, as well as an RTO or CFD. I would say on average it performs more like a single net lease with the host handling maintenance and management as many owners are more comfortable taking the responsibility for taxes and insurance out of the hands of the host/operator.

I had originally intended to use master leases, but there was generally less enthusiasm from both parties.

Hi everyone, a few of you may have seen my enthusiasm in the past about utilizing Air BNB's platform to bring entrepreneurs together with investors to expand both of their businesses and while I have done some limited testing in my own market with favorable results, wanted to get other's opinions and share this idea.

In the Twin Cities market in Minnesota we are fighting hard to find 6% cap rates in multi family homes (oftentimes even harder in single families) which has turned off many investors who have been sitting on their cash for the last year.  At the same time, the Air BNB market is gaining some momentum, but the biggest limiting factor for expansion for most Air BNB operators is the initial capital investment to acquire a new property.

My solution is to pair the two by vetting and working with experienced Air BNB operators who want to expand, but don't want to be relegated to negotiating over and over again with landlords who can't rent their house to an ordinary tenant or don't have the cash/inclination to stick 20% down payments into these properties.  This is an inefficient use of time and does not allow the operator to expand their business into the desirable areas they should be targeting (which consequently is where most investors want to own RE).

If an investor can acquire any property an operator would like to use and get some standard return on a long term lease (8 cap is the target for 5 years), the investor is able to benefit by getting a slightly above market rent amount without having to pay for management.  The operator is also happy because they get a new property that they choose with the ability to profit anything above the rent amount they are paying per month, which will allow them to scale much much faster.

As I said, I have interested and willing parties on both end already, but wanted to open the idea up to scrutiny and feedback and hopefully allow people in other markets to take advantage of this model to scale their business.

You can find what reasonable rents are for the property and then compare it to the market's cap rate to figure out a good estimate.  At the end of the day you just want to know what someone else will pay for it, so decided what you would pay for it is a good indicator.

I think it depends on what your situation is and what kind of goals you have.  If you are serious about real estate, how much will that additional $2k a year really be worth to you?  If your goal is to grind out a career and retire, 401k is the move.  If your goal is to make a bunch of money, your first focus should be getting your income to a place that can support  active investing, which I would argue would be somewhere that $2k/yr doesn't matter one way or the other.

If you are already at that point where the money doesn't affect your ability to invest then an immediate 100% return on investment seems like a pretty good deal.

I just point this out because I think many people are focusing on the wrong problem when they look at this question.