All Forum Posts by: David Benton

I would not see an Investor selling as a red flag, they own multis. If I can deal directly with the seller, why not? My model is to buy and sell in 3 or 5 years which is the same for many. It's actually a better plan to leverage up than keeping the property but, I guess, depends on your business plan. 

You need his P&L and Rent Rolls to run numbers. If they check out put it under contract and perform your Due Dil, which part of that can be to verify what tenants are paying in rent. Ask a few of them. Would not use rentometer but instead contact a property manager who manages multis and ask them what market rents are for 1,2,3 BR, xBa, that age, location and amenities property.

You need to study a while for sure. Learning the hard way is investing before you know what you're doing and that's a tough road to venture on in Multifamily. Unless you're paying cash you need financing. No lender is going to finance you without credibility from Multifamily experience, that is unless you have related credibility. Without experience you will find it is best to partner with someone who has the experience and can provide a resume validating their experience to the lender. An experienced partner, at least the right one, will be well worth the split in what you learn from their experience.

Thanks Jeff, I spoke with another investor and they told me the same thing, referred to it as the Pigtail Method.

Does anyone have experience dealing with the apartment complexes built in 1970s with aluminum wire? 

One question is the resale issues anticipated and how the aluminum wiring affects desirability/marketability and value.

Another question is what is the rough cost per unit (approx 1000sf) to rewire with copper wire? I know this is a question for an electrician but thought I would post for someone who's done this. This is 120 units with all aluminum wire.

I agree 10-15 Investors is a lot for $500,000 and as stated but, it's all about what makes the deal work. I would insure these are people I know well to avoid SEC violations. 

I've structured Operating Agreements in the past through a series LLC (a) with myself in (a) and other investors in the other LLC (b). The split would always depend on what someone brought to the table, and not just money. Personally if the others were bringing only cash and I were the sole sponsor or had a co-sponsor in with me, my LLC (a) would not get less than 25% of cash flow and the equity and more likely 50%.

If using the syndication structure I might set up an acquisition fee at minimum and possibly other fees depending on the scenario. 

Mine was usually structured very simply to receive 25%-50% of all cash flows after expenses. 

@Bryan Hancock

Thanks for the insight.

@Amy Wan

What I'm in the process of doing is a little ambitious and depends on some partnering to put this together. I'm working toward putting a fund together under the Rule 506 (b) and another fund under Rule 506 (c). At least that's what I'm looking at so far. This may change and may do both funds under 506 (c) but would like to also work with some investors I know that are non accredited.

I have my conceptual Business Plan, PPM, Disclosure, Subscription Agreement etc... about 80% complete. I'm basically ready to start talking with investors and looking to bring some people together on a team. 
@Amy Wan

Hey Jason,

I've listened to several speakers proposing this as well and know some who did have lenders at 6% and probably still do so I know it works. 

If your objective is to build relationships and make them want to continue doing business I would offer a bit more. This was my objective as well. I always wanted to give what I believed to be fair returns so I offered 8% to 10% or gave them an equity position. When I gave an equity position it was 50% if just me and the lender and in cases where there were multiple investors I got 50% and the others split 50%. Just the way I did these. I'm now looking into getting involved in larger projects and offering 7% to 10% of their investment from cash flows plus an equity split when the property sells. There is no one way to structure returns. I usually just step back, weigh the risks with the opportunity and analyze the numbers to determine what works and what doesn't coming up with the returns offered. Hope this helps.

@Jim Keller I though about this some more and remembered something on this. If you're providing general information through the mailer to later get to more specific communication once a relationship is established, this is in compliance.

@Rick Rivas A Crowdfunding Portal might work for $40k or a little more. You need a good Business Plan put together for this and for most other Capital Raising plans. The Business Plan helps you identify flaws in your plans as well as shows the potential investor what they're getting into. 

The other approach is to look and keep looking for a money partner. You do the work and they provide the capital. 

On the investment group I would look closely on the valuations given and independently do you own numbers. I've seen many properties pitched that were very high risk and the profits suggested never come through.

Thanks, I saw this site a few days ago and it's good info @Joshua Fulenwider 

I did some more research and found some guidelines. Seems the Crowdfunding approach may not be the best for RE except for instances where the target is $100,000 to maybe $300,000, too many restrictions.

I also remember listening to Alan Cowgil ~15 years ago talk on raising PM. His approach was to establish a relationship, ask where they were currently invested, provide information on investing in RE, get face to face when practical, providing more information but not a deal. After meeting, emailing and talking, a relationship was established which allowed to ask if they might be interested in earning a higher rate of return... and there it goes. So on social networks this should work with the same model...

In the long haul, the Private Placement model seems to be the way to go for building a fund. I'm close to getting all the docs completed and ready to launch a campiagn.