All Forum Posts by: Elliot Landes

@Nick Gerli

I find it strange to see ONLY positive appreciation on the “worst” list. Surely there are some cities that moved negatively, right?

Unless we’re going to put appreciating vs depreciating in two different categories, but I don’t think that’s a very fair stance to take because we’re talking about the same thing, a change in value. Either way, all of these went UP in ONE YEAR. So what’s the worry?

@Guillermo Oyola

Early or not, if he did a GREAT job, left you happy, was cheap to beging with AND you want to use him a lot in the future. Make the gesture now and toss him a few extra bucks

@Edward Moore

Finally a question on BP I feel well qualified to answer!! Haha

Yes! The LLC absolutely needs Commercial General Liability insurance and Property Policy (or Builders Risk policy is major construction is taking place). Get it for all your company and it will just follow along to every project.

I love explaining insurance and I’m big in examples, so I’ll dive in...

GL:

Your insurance for the GC covers the work/operations of the GC, as well as any garage/office/shop/premises owned by the GC. It does not the work/operations of, or premises owned by the investment LLC. You may be able to structure the policy with both entities as Named Insureds. If it's a low cost policy (under $10k) probable not but Speak with your agent about that.

Scenario 1

If you have a broker out to the property for a sales meeting, he's likely there to do business with the LLC, not the GC. So that's the LLC's operation. If he slips and falls, he'll sue the LLC. He probably has no recourse against the GC.

Scenario 2

This will get complicated, but I’ll try to break it down as best I can. In the insurance world there is a term called “Third Party Action Over”. What this means is a sub contractor (third party) sues (action) the property owner directly (OVER the contractor) when he gets injured on the job. You’re probably thinking, but that’s why the GC and subs carry Workers Compensation coverage. But what if he doesn’t? Maybe it be lapsed, or he is an independent contractor and exempt, or maybe you sub is using under-the-table labor. That injured person has no recourse for that injury, so there only recourse becomes suing the property owner and they will! There are even cases where the injured person collects WC and still sues the property owner! This could happen for any number of reasons, doesn’t make sense to go deep in to them now.

I could give SEVERAL more but these two do a good enough job.

Property:

If the LLC owns the property, they need to carry property insurance for the property. This covers you for direct physical loss to the building. Because property policies are often packaged with a liability component A lot of people think they are one in the same. They are not! Property = 1st party direct physical loss. Liability = 3rd party loss (in the form of bodily injury or property damage).

Builders risk:

Buildings in the course of major construction often don’t quality for property coverage. They’ll be insured on a BR form which may cover some combination of the actual cash value of the existing structure and the replacement cost of any renovation. Or in the case of new construction, the replacement cost o through various courses/stages of construction (it essentially scales with the project). Speak with your agent about this. If the work is light, you’re probably fine woth a property policy but if your taking things down to the studs, you might find some problems with a standard property policy.

Finally, and I can’t stress this enough, GET A GOOD SUBCONTRACTOR AGREEMENT! Make sure it has provisions for ALL the insurance they need to carry, make sure it indemnifies you for injury they cause, make sure they hold you harmless if they are injured on your site. These are far more important that insurance. Insurance stops the leak, a good contract prevents the leak.

Thanks for the reply. Yes, I have made my way into the high earner category over the last 2-3 years. I've always had a good salary but only recently would I qualify it as high-earning. Its only been in the last 12-18 months that I didn't have a per-determined use/purchase/renovation for that new money coming in. So now I'm exploring how to put this money to work.

The thought to use debt was essentially a means of kick-starting my involvement in a big way early rather than save to invest and grow down the road. Through the great discussion points here, I am NOT going to use debt for syndication. Instead, I have some cash right now that I'm ready to deploy, and I'll add to my syndication positions as more money comes in.

@Bryan Hancock

Those are the reasons I haven’t ever used a financial planner. I only ever talked for 2 or 3 but those discussions all circled around securities or funds that clearly paid them bigger margins than others. And they all seem to think everything outside of the stock market is a bad idea or that somehow the the stock market is inherently better than other investments.

Based on all the feedback here I’m not going to leverage in to syndications. I may deploy leverage elsewhere where it is more directly tied to the asset at hand.

Thanks for the reply. I share the opinion on good debt and bad debt. Based on the responses from everyone here, I'm realizing it goes a step beyond that, there agood uses and bad uses of debt. Syndication is probably a bad use of good debt. I'll put my cash in to syndication, and find another use for debt.

401k loan allows you to borrow up to $50k from your funds and then you pay yourself the interest! So there is the conundrum; does my usage of that $50k beat stock market returns? Considering how my 401k has performed (7-9%), that shouldn't be hard. Even if I just match it, at least I'm diversified a bit away from Wall Street. The 401k selection of funds is somewhat limited. It is self-directed to the extent that I get to pick which of those funds I participate in. Using the loan gives me investment options beyond those funds. But I think I'll deploy it elsewhere.

Thanks for the reply. Just curious, what was your goal when it made sense to use leverage for syndication?

I have a pretty specific 5 year target in mind for growing my wealth (Not chasing cash flows to replace my income). I know the destination, now I'm just trying to map my course to get there. Based on all the responses here, leverage through syndication is not a path I'm going to take. I'll try an apply leverage somewhere else.

Originally posted by @Account Closed:

"asset is independent from the loan."

I think that just hit the nail on the head for me. I knew had to be some reason why this shouldn't be a good idea, or something I was overlooking, and for me, that's it. Thank you for the reply.

Great responses in this thread from some heavy hitters, but that statement gave me the 'aha' moment I needed to help make a decision. Thank you!

@Taylor L.

Thanks for the reply.

Yes, this is my first deal, so maybe I just need a little patience and wait.

@Bryan Hancock

Thank you for the response. Would speaking with a financial planner help give me a better picture of how much leverage is right for me?