All Forum Posts by: David Gotsill

Hey @Ethan Ducharme - I may be able to share a template of what my partners and I use, but it's very basic and might not bu much use to you depending on what you're doing.

Can I ask what is the business plan for the property?  Is this a simple buy and hold?  Will there be substantial rehab?  Will there be financing (and if so, from what sort of institution - local bank, national bank, Fannie/Freddie)?  Who are the other partners?  If it's a 50/50 simple buy and hold with your buddy Groucho from high school, the agreement(s) could be vastly different than if it's a ground-up development with multiple partners with different roles and contributions.

Below is a short list of items that I listed on a separate forum post as those that I think of as being "key items" for discussion with your JV partner(s), before you even begin to look at documentation.

1. Business Plan. What's the full business plan for operation, how certain is that plan, and what is the timeline.
2. Control. Who controls the decisions of the company? Do all partners vote for all decisions? Does a "Manager" carry out day-to-day at her discretion, but other partners vote on "major decisions" (such as a sale)? If there are votes, how are they determined (one person, one vote? or is it based on the percentage of capital contributed?)
3. Capital Contributions. Who is responsible for contributing what funds? When are contributions to be made? What if, down the road, additional contributions are required to operate the property, are partners obligated to fund additional contributions? If they are so obligated and don't so fund, what are the consequences (dilution, buy-out, loss of voting)?
4. Transfers. What happens if one partner wants out? Can they sell their interest? Is there a right of first offer?
5. Distributions. What is the basis for calculation of distributions, what is the timing, and what expenses are deducted prior to distributions.

Happy to chat further if any of this triggers additional questions.

@Kristen Nguyen - I'm your 'neighbor', in SF East Bay.  

I'd reiterate the comments above, particularly in thinking about bad cases. When you're talking about an LLC/partnership or other joint venture, there are some key provisions that are most likely to cause friction if not understood from the beginning. I'd recommend that you at lease conceptually cover these items below. Your professional advisers can document this as needed, but you should understand:

1. Business Plan.  What's the full business plan for operation, how certain is that plan, and what is the timeline.  
2. Control.  Who controls the decisions of the company?  Do all partners vote for all decisions?  Does a "Manager" carry out day-to-day at her discretion, but other partners vote on "major decisions" (such as a sale)?  If there are votes, how are they determined (one person, one vote?  or is it based on the percentage of capital contributed?)
3. Capital Contributions. Who is responsible for contributing what funds?  When are contributions to be made?  What if, down the road, additional contributions are required to operate the property, are partners obligated to fund additional contributions?  If they are so obligated and don't so fund, what are the consequences (dilution, buy-out, loss of voting)?
4. Transfers.  What happens if one partner wants out?  Can they sell their interest? Is there a right of first offer?  
5. Distributions.  What is the basis for calculation of distributions, what is the timing, and what expenses are deducted prior to distributions. 

Always happy to chat REI, and best of luck.

@Cody Strickland - You may have already tried this, but have you reached out to any contacts you have in Reno, such as your PM, lender, agent, etc?  

If that doesn't work, I'd reach out to a Reno-based REIA or similar group for recommendations. I think that's more likely to lead you to an investor-approved real estate attorney.

You could also try the Washoe Country Bar Associations list by practice area for real property lawyers (where it says "select a category", choose "real property"):
https://wcbar.org/lawyers/

The Nevada Bar Association has a referral service, but I don't know how likely you are to find someone who gets investors:
https://www.nvbar.org/lawyerreferral/lawyer-referral-information-service/real-estate/

Best of luck,

David

@John H. Hill Jr. - I tend to agree in principle with @Amy Aziz, but there are a few approaches you could take.

You could simply engage someone 'local' to the new property for everything related to the new property.  You have two attorneys, need to maintain 2 relationships.  With attorneys?  Eww.  (just joking.  kind of.)

Or, if you like your current attorney, then continue to use them as your main adviser.  Then for the few items that you'd want confirmation from local counsel, such as your form of tenant lease agreement and any eviction proceedings, you can engage someone local to the property, meaning licensed in that state and able to conduct evictions if the need arises.  Your current counsel may even be able to recommend someone to you.  

I can certainly tell you that, as an attorney, I am frequently asked to liaise between our clients and local counsel in various jurisdictions around the country for local expertise.  For example, your current attorney can say "Dear Local Counsel, can you please review the attached form of tenant lease.  The client has included terms she desires, but please let us know if you feel any of these provisions would be problematic in [Illinois] or if we are missing any [Illinois] specific provisions that would be helpful."  That way the task for local counsel is limited, as should be their fees.  (Anecdotally, the typical response is likely to be "Oh, no issues for Illinois, except that Landlord must designate wither the security deposit will be held in an interest bearing account or a non-interest bearing account", or some other very minor comment.)  Here, you still only deal with the attorney you know and like.  Plus, you basically build-in a second opinion since the advise of local counsel passes through your main attorney, and she can confirm/ask for clarification as needed.  

It's a good system, and as an investor, one that our team uses in invest in Huntsville.

Hey @Jonah Peralta  - 

I'm based in SF East Bay, but no experience with auctions.  I would think that you could find public information from the various cities and counties.  For example, Contra Costa County tax foreclosure sales seem to be listed on the County site below:

https://www.contracosta.ca.gov/2218/Public-Auction-Information

There are presumably paid services for bank auctions or other actions, such as those through the probate courts.  

Hey @Jhanna Dawson - welcome to BP.  I'm you're neighbor in East Bay, living in Lafayette and working in San Francisco.  

I agree that we've got a great community here. I'm always happy to connect and chat about REI, and best of luck!

David

@Jennifer White

I generally agree with comments above, and it's easy to see why you'd want to know in advance the information/skills/connections that other commentors have mentioned.  Two things from me:

For me, I think I waited to long looking for something perfect.  I would have been better off to just get started sooner with "average" deals, even at retail (so long as you're not bleeding) than to have lost time due to indecision/waiting for perfection.  If I could go back, I would just jump in sooner.  

Second, more and more depth to my conversations with property managers/prospective property managers.  It was mentioned above, but if you're not going to self-manage (and I'm not), then your PM is probably the most important member of your team.  Looking back, I should have been more aware of that and more communicative with my PM.

@Jack Tinker I'm sure there are a number of possibilities, but for most transactions you're not going to be strictly bound by your offer.  You'll typically have some standard contingencies that can allow you (as potential buyer) to walk away, such as an inspection contingency or financing contingency.  I would think that experienced  buyers likely even shoot for broader language, along the lines of "cancel for any reason" without loss of earnest money.  Or, in the unlikely event you have to sacrifice earnest money now and again, it's just a cost of business (maybe they're negotiating lower EMDs - that's something we've been able to do).  Another possibility: these guys are crushing it, and can in fact fund and close on multiple offers at the same time.  Woot woot!

Best of luck!

@Michael Balducci - welcome to BP and sweet news on the new project in Huntsville.  My partners and I operate in Huntsville as well, and we really like the market.  We just closed on 12 units last month that I'm really excited about.

I feel you're really in the right place to pick back up with REI and make some good things happen. I'm out-of-state, but a couple of my partners are local to you and I'd be happy to introduce them if you're interested. Also happy to chat here or on the phone about all things REI.

@Gorden Lopes - I see you're also in the Bay Area and invest in Huntsville?  Same here.  Let me know if you're interested in jumping on a call or, if you work in SF proper, grabbing coffee or lunch.  

Best of luck guys!

@J Scott congrats on taking the plunge.

If you stick to your plan of holding and renting out, I don’t think you should have any issues due to the lots/addresses. There could be some problems if the structures themselves are not safe or somehow otherwise not compliant, but I find it hard to imagine that Florida renters are protected from lot-line or address issues (we don’t even do that here in Cali, where we love tenants like nothing else...).

I’m not sure how you financed the acquisition, but I could see issues regarding the lots being raised by lender/title insurers, either in the event that you try to finance it or sell to a buyer who is using financing.

Long and short: I agree with your agent (but still encourage healthy skepticism).

Thanks @Bastian Kneuse and @Tim White.  Pretty stoked about this deal, and again, just grateful for the BP community.

Tim - seems like you're living in a great area, I hear good things about Madison.  I hope to make it down to visit our properties (we have some in Merrimack and the new one is in Harvest) sometime soon.  I'll definitely look you up when I do!