All Forum Posts by: Dan Thomas

He put in 80% and I put in 20%.  He owns 19.9% I own 80.1%.  His investment is a loan at very favorable terms compared to a bank (no personal guarantee, rate less than the banks, etc.).  Being chairman was a non negotiable in his offer and it was put into our operating agreement.  Our operating agreement limits his involvement as chairman to creating the agenda for quarterly meetings (with my input) and acting under the responsibilities as a manager on the board of managers.  He can't do business on behalf of the company without my involvement. 

In our bylaws it states that if we can't agree on board comp we will hire a 3rd party HR firm to perform a salary study.  At this point in the game I feel we are blowing money if that's how we choose to spend it.  I am hoping to get enough knowledge to come up with a solution amicably without going down this route.

Thanks for the reply Chris.
 

Looking for some insight.  This is more business related than real estate related but I'm sure there are folks on here that can help me!

  I recently took an "Angel" Investor for my small business in an effort to grow.  We disagree on how the board of managers should be compensated.  He negotiated a spot as chairman of this board and feels he is due compensation in addition to his equity.  The rest of the board is asking for merch and product in return for their time.  This is a very small start up Brewery with very little income currently.  Does anyone have experience on how compensation for this may look?  He wants options....He has a non dilute clause so his options would come from my equity which I don't want to give up for obvious reasons. 

The specific authority of this board per our operating agreement are as follows:

(1) Approval of annual (or semi-annual) budget submitted by the Chief Executive
Officer.
(2) Setting compensation for Officers.
(3) Setting compensation for Managers.
(4) Approval of profit distributions and profit and loss allocations to the Members.
(5) Quarterly review of the profit and loss statements and balance sheets.
(6) Review and audit of year end financials.
(7) Approval of any single expenditure over $10,000.
(8) Approval of new hires. Approval should be limited to approval of the number of
hires, not the interview of the particular candidate.
(9) Approval of any new members.
(10) Approval of any contract or lease entered into by the Company involving a
financial exposure in excess of $10,000.
(11) Approval of any sale or divestiture of company assets.
(12) Approval of any declaration of bankruptcy.

We have agreed at the board level that we would meet quarterly in person but that isn't specified in our operating agreement and I suspect the rest of the board would prefer to meet virtually.

Any insight on what normal compensation for this type of arrangement would look like would be greatly appreciated.

I think you will definitely want to talk to your lawyer because there may be items linked to this transaction you are not considering. In general though, I would think that if this is a partnership LLC you could make a capital contribution in return for equity in the LLC. If you are paying cash for the STR this seems pretty easy. If you are taking on debt for the STR this gets a little more complicated, but not much. Your lawyer will have advise for you. Their capital contribution should be pretty easy to establish as it would be the value of the land.

Like I said, I'm not a lawyer and I would suggest you talk to one but this seems logical to me. 

@Christopher Morris

You got alot of great insight already. I'll add that every successful real estate investor i know personally has a w2 job and none intend to get rid of it anytime soon.

Making real estate your primary income source isn't passive unless you have access to significant capital. Not debt but YOUR money. The example that Arn gave you probably gets a whole lot more expensive when you give 8% of gross to a manager to make it passive.

@Jacob Anderson

I've only used my HELOC for investing when I have a quick exit plan. For example funding rehab with the goal of a quick refi to pay off the heloc. There are alot of risks using your heloc and you need to understand how you will make the monthly payments for the heloc AND how you plan to pay off the principle of the heloc. Being 100% leveraged isn't a good thing. It may make sense to save a bit more and invest from a position of power.

Keep in mind most helocs are adjustable. I got bit a couple years ago and went from a 6% rate to almost 10% rate. The impact to a balance of 100 or 200k is substantial. Make sure you are prepared for that and have a contingency for that.

 Thanks!  I'll check them out.  I have not looked into them previously.

 We don't specifically ask for them to "close" but we do ask for them to lock the door behind them.  I would assume any halfway intelligent human being would understand we mean "shut and lock" but maybe I assume too much.  We can certainly be more blunt in our wording.

I will try a different rep..good idea, Thanks.

 I don't see the value there....paying a plumber to come re-iterate common sense.  I suspect I will throw more money at a problem Airbnb has no interest in covering

 We had a back to back booking that day so the cleaner was there at exactly check out time to ensure they could turn the place in the 4 hour gap we have.  I can't speak to what time these slobs left as I don't require notice but the cleaner was there promptly.  

 It doesn't make sense.  It's only $1200.  I am just really frustrated that they advertise this insurance that they refuse to pay out.  I have supplemental insurance so I am of the mindset that they should get rid of this bogus insurance and lower my host fees..