All Forum Posts by: David Gotsill

@Daniel Suarez -

No loan, got it.  I see now that you said it was a cash purchase.  

One additional thought on how you might be able to continue to hold the property together with your LLC partner (if that's what you'd like to do) but without the LLC. Many jurisdictions will permit a title transfer to be carried out without any transfer/deed taxes or fees if the beneficial ownership of the property is identical both pre-transfer and post-transfer.  

What that means is this: assuming you're 50-50 members of the LLC, the LLC would deed the property to you and your partner, as tenants-in-common, each with an undivided 50% interest in the property. In this way, each of you has an identical 50% beneficial interest in the property both pre-transfer and post-transfer, so although there was a technical transfer (from the LLC to you 2, as TICs), the jurisdiction would not require payment of transfer taxes. You would have to see what financing options you have as TICs - I'm not sure if it'd be more similar to terms you expect as a single individual borrower or terms you'd expect as an LLC borrower. I'd bet that your local lender can quickly let you know, however.

@Daniel Suarez - 

You mentioned that the loan amount is not that large.  If that's the case, even though the interest rate is "high", the actual amount of interest payments may not be that much higher than if the loan were at a lower interest rate.  Options (a) and (c) that you mention each involve an actual transfer/closing, with all of the accompanying costs.  I'd take a close look at what you actually stand to save when considering all costs.  

For example, if you're dropping from an 8% to a 5% on a $50k loan, that's roughly a difference of $1,500 per year in interest payment.  If your transfer/refi/closing costs are going to be in the order of $5 or $6k, then that eats up nearly 4 years of the "saved" interest payments.  You might consider riding it out a bit, in part to pay down the loan and in part to (hopefully) ride some appreciation.  This would allow you to enjoy the fruits of your labor for a while before taking the hit on transfer costs.  

Not that I'd necessarily recommend this, but you could also consider paying down the loan on an accelerated rate (for example, all cashflow goes to principal until paid off), and in that way in short order you two would hold the property and open up your loan slot.  

@Michael LemMon - I'd generally reiterate what's already been said, particularly that until your portfolio is quite large the differences between states may not be material.

One additional point to consider: are you obtaining acquisition financing or do you later intend to cash-out refi? If so, you might want to speak to a lender(s) about what internal rules they may have. As a case in point, for investment properties in Alabama, I was given the OK from one lender on an AL LLC, but no to a CA LLC (I'm based in CA). A separate lender insisted on a DEL LLC.

Good luck!

Seconding what @Joe Homs recommends as likely the cleanest approach.  

Hey @Daniel Infante  There are a number of active Japan-based BPers. Among those that I communicate with most frequently are: @Daniel Mills, @Matthew Pinkston and  @Casey Maeda

I'm in Japan in late December. I'll be close-ish to Hiroshima (on Shikoku), but no time for REI chats (sob).

@Daniel Infante - Are you in Tokyo?  If so, there's a monthly BP meetup on the 3rd Thursday of the month in Roppongi (where else?).  You should go, if you can.  Although attendance varies widely each month, many investors there invest in the US.  Let me know if you can't find the info for the meetup, I can share it.  I'll be back in Tokyo this month, but will unfortunately miss the meetup.

There are also other active Japan-based investors on these forums, I'd recommend you search them out.  I was in Tokyo for a bit, and would be happy to connect and introduce you to a few other investors, if you are interested.  

If you're going to target BRRR properties, I think your best bet would be to team up with an agent and/or PM, and let them recommend lenders to you. That process worked for me and my partners.

Best of luck, and don't hesitate to post questions. 

Hey @Ashley Ohno - welcome to BP.  Where in Saitama are you?  I used to live across the river near Akabane, and would hang out in Kawaguchi.

I'd recommend that you try to connect with some other Japan-based investors here (I used to be based in Tokyo, but now back in the US). I'll go ahead and ping a few here: @Daniel Mills, @Shu Matsuo Post, @Casey Maeda, @Cory Ballantyne.  There are more of us (them?) on the forums too, if you spend some time and poke around.

I also recently connected with Miho Hatanaka (she's on the forums, but for some reason I'm unable to tag her) who's from Japan and now a real estate agent in Oregon.   

One of key thing to be aware of when investing from abroad will be how you work with a lender. There can be a few more steps involved, such as you may have to translate your gensen-choshuhyo (assuming you're being paid by a Japanese company) and other documents for income verification. It's all doable, just a little bit more involved.  

I also recommend that you attend the monthly BP meetup in Tokyo, hosted by the charming and accomplished @Matthew Pinkston.  They meet on the third Thursday each month at a cozy place in quiet ol' Roppongi.  You can find them on these forums or on Meetups.  The attendance varies, but its always good and a great way to meet people who are active/aspiring investors.  In my experience at the meetings, most regulars were investing in the US.

I acquired one property in the US while I was still in Japan, and I'm happy to take a shot at any questions you might have so, enryo naku, ask away.

Best of luck.

Interesting question @Yonah Weiss - were you up pondering the mysteries of life?

I studied Japanese language and literature. On paper I would be hard-pressed to find a link between that field of study and REI, but in my case it's easy to find a connection when I trace where my studies took me.

Studying Japanese led me to Japan, as a college student and then later as a 'real' adult. I worked with clients that were investing in real estate, and saw the power of REI as a vehicle to build wealth. I met BPers on the ground in Tokyo, and forged some connections that allowed me to begin investing in Japan. Additional connections on the BP forum gave me the opportunity to invest in the US. It's possible I would have eventually found REI had I not studied Japanese, but it's also possible that I could have missed the boat.

Although (like many others) I wish I had come to REI sooner, looking back it was an OK route.

Deha, sayonara.

Hey @Account Closed.  There could certainly be no-go items in a PPM, which is why I would always read through it.  But it's hard to categorize or think of a hypothetical example (in the handful that I have reviewed, there's been no such terms).  I think that as you review, you would gain a feeling for what's ordinary/market, and that when you encountered something that was an outlier, that's when you'd want to dig into it more.  

@Account Closed - I'm torn on this one.

I understand and respect the input from @Jerel Ehlert (and if asked in my capacity as an attorney I would provide the same response).  

But then I ask myself, as an investor, would asking an attorney move the needle on the deal?  I.e., would an attorney pointing out potential issues change my willingness to invest?  For the most part (at least for me), it likely wouldn't, because I think the potential issues are almost always the same, and they are business/operator issues, not legal issues.  I am also assuming that the LP understands what being an LP typically entails.  If the person is brand new to it, then I think a discussion with an experienced attorney would be very helpful.  And in all events, the LP herself should read the PPM, as @Mike Dymski says.  

I'll acknowledge that I'm making broad generalizations that may not hold true in all situations, but are probably more-or-less true for most syndications (and are true for those I've reviewed) - so here's what I mean:

As a typical LP, you'll have zero ability to influence the terms of the PPM (perhaps if you're funding 25% or more you can get some concessions).  If you can't negotiate terms, then the potential LP decides either a "yes, I invest" or "no, I'll pass".  

What are the terms that matter, from a legal perspective?  Well, 5 of the key items are going to be liability, contributions, distributions, transfers and control.  For most syndications:

• LPs will have no liability (other than loss of contributions) and you'll want to check the liability of the GPs;
• LPs will make initial contributions; and you'll want to confirm if LP is on the hook for any additional contributions;
• Distributions will ensure the GP/operator gets their cut (I'd want to know what that cut is), then to LPs in accordance with their percentage;
• LPs will agree that they cannot transfer their LP interest without the consent of the GP - you're locked in to the deal until the GPs end it;
• LPs will have none (or very little) rights to vote on operations, and GP has control.

The above isn't an exhaustive list of material concerns you might have as an LP, but it's what what I would expect and confirm for any syndication.  If I assume the above is true, then I'm basically left with due diligence on the GP/operator and the property/offering itself.  As @Chris Seveney and @Michael Bishop say, it's trusting (with due diligence) the operator.  If I wasn't comfortable confirming the above on my own, then I would definitely seek help from an attorney.  

Always happy to consider any differing opinions or questions.