All Forum Posts by: Evan Loader

Good morning BP community. I am reviewing a potential private lending deal as the lender of a rehab fix and flip. I would appreciate what you think of the structure of the deal. The numbers are as follows - 

Purchase price - $180,000

Repairs - $150,000

Final projected sale price - $475,000(comps with similar layout/size in same neighborhood are going for $495,000-$525,000.)

The investor has a first-lien hard money lender lined up for $306,000. They need an extra $56k to to cover a portion of purchase price and closing costs, monthly holding costs, and the first payment to the contractors(required by first lien lender). They want me as an investor to loan them $56k as a 2nd lien recorded after initial closing(first lien holder won't allow 2nd lien to be recorded until after initial closing). They initially offered me 14% for a 10 month hold, with the interest paid at the closing for final post-rehab sale. But they re-calculated their numbers and offered me 20% for a 10 month hold, with interest paid at final post-rehab sale closing. 

What do you think? I don't want to provide details as to location and specifics of the house, just need some feedback on the numbers/structure of the potential deal. Thanks!

Why hasn't anyone mentioned the standard meal allowance? For records purposes, that is the easiest to use. I am thinking longer term business travel though, so perhaps shorter term your actual meals are more than the standard meal allowance. I spent nearly a year in Saipan as a 1099 contractor, and found it much easier and financially beneficial to take 50% of the standard meal allowance for my locality(it was $79 in 2016-2017 for Saipan or $39.50 deductible each day I was there). 

@Sarah Doogle the generalized obstinate assumptions you continue to make should have told me the lesson I suspected from your first reply.... don’t feed the troll. I guess I should have kept this excess cash in CDs earning 2.2% to await a better deal, sponsors earning ‘yummy’ fees are clearly evil for putting mutually beneficial outcomes. You stay classy.

@Sarah Doogle it seems to me you only like value add when it comes to syndications. I reviewed quite a few deals before this one and value add is only one piece of the deal. Projected 15.6% IRR at year 6 and preferred returns all 6 years, I don't really understand your issue other than it isn't value add.

We are late in the economic cycle, but the economy doesn't stop in a recession, they also are short-lived. This is buy and hold real estate, with a 6 year plan. Under market rents and utilities upgrades can all push up values in forced appreciation NOI. If you had some deeper insight on this I would understand but your 30,000 feet analysis ‘I wouldn't ever do this because value add...' and giving little credence to anything else seems hollow.

@Sarah Doogle is there anything else you can add with some more meat on the bone? Generalities like ‘magic’ don’t really do much to help. This property will have renovations performed on the units, but not a full reno.

The HVAC system on this property is ancient and is costing an arm and a leg in cost to the landlord due to utilities being covered by the LL. If we replace those systems our underwriter projects they can save at least 20% based on comparable repairs to similar properties. They emphasized they will exceed this number as it is very conservative. All of those savings go to the bottom line since the LL covers it.

@Ade Babasola I don't want to get too specific because I don't have the authority to disclose details yet. But as for numbers it should be a projected 15.6% IRR, CoC is kind of complicated because they are supposed to refinance halfway through returning half my capital. But its good, I will say that.

Just wired the $ for my first syndication as an LP. It is a 200 unit stabilized apartment, with some small value add, but the main focus is getting utility costs in line. Nervous yet excited. Did extensive DD to ensure the numbers were correct, the sponsor had everything in order and the deal was solid, so that keeps the worry at a reasonable level.

For those who have participated in one, how did you feel after you sent the money? What were your expectations? How did the first year or two go?

 You don't have to be accredited, you can be sophisticated under the SEC Regulation D, 506(b) exemptions. Most syndicators(not Grant Cardone) accept sophisticated investors on their non-advertised syndications. I'm currently investing in one right now as a sophisticated investor.