All Forum Posts by: Michael H.

If you have multiple foreign investors, then it sounds more like a Fund or Syndicate rather than a Joint Venture. You will need an SEC attorney to draft PPM, operating agreement and other documents to follow SEC rules. 50% split seems high. It will be much easier to have your investors loan you money as an acceptable interest rate. Just keep in mind, there are various tax compliance that needs to be prepared whether they are investing via equity or debt 

There is a lot of misleading information in this thread. Message me if you’d like to discuss. Im in Dallas too. If you are developing to flip, none of the expenses are deductible until the time you sell the property so your investors will not get a deduction. If you are developing to hold, then most of the expenses are capitalized to the property. Once the asset is placed in service, then you can start depreciation. However, if you have high net worth individuals, they most likely have a high paying job and do not qualify for real estate professional (unless they meet the criteria or have a spouse that meets it). Therefore, they cannot offset passive losses with their active income. 

 Right. I’m talking if it’s all accredited with 506b

 I thought it was 15 days after the first sale of security. I have a scheduled call with an attorney.

I think cost perspective, 506(b) with accredited investors might work. I believe no audited financial statements needed and no PPM or investor questionnaire. 

LP contribute $450k and it’s structured that they get a 8% pref and GP get 20% carry with catch up. Most of the investors will be mostly passive. In another words, profit is not split proportionate with their capital contribution

I recently closed on a property late last week where I pooled money from friends and family of $450,000. The structure is very fund like so it falls under "selling of a security". Unfortunately, I had not looked into it as much given the $ amounts.  Now, after researching, I realized that I have to hire a securities attorney to draft the PPM, subscription document, and file Form D exemption. Below are some questions I have before really discussing it with a attorney

1. Is it too late to get all of my documents in place? What if I am late? For example, Form D I believe is required 15 days when the sale happen

2. At a $450k raise, it feels like a small amount to register. Can I do the following:

A. Since I will be doing this more with other investors that I have pre-relationship with, would it make sense to set up a bigger fund with first close being $450k, and subsequent closes to be $1M plus. The structure will be based on a deal by deal basis. So the first set of investors will only be investing in this first deal. Next close will be for another deal. Carry will be paid on a deal by deal basis. There would be an option for investors to exit after the target investment is disposed (within a year since these are quick flips).

B. From my understanding, File Form D is filed with a CIK number. All of the other documents are not submitted. I know this is not a popular option, but what if I drafted the PPM and subscription documents myself as a DIY. All of the investors that we are working with currently are people we have done business with so there is a high level of trust. In addition, this will be a 9 month hold and we will liquidate the LLC.

C. Is a PPM required if all of the investors are accredited? Out of the group, only 1 is non-accredited and I can negotiate with him to possibly loan money for interest. I will do that if it makes things easier. 

Thank you!
Mike

This is my first large renovation where we are adding an addition to the back patio and new attached garage (in Dallas).

We had an engineer do a foundation design and hired a concrete company to form the foundation based on the design. We have a building permit in place for the remodel. However, unfortunately, we did not do a pre-pour inspection and now the city left me a message (after we called in for inspection of the electrical) asking why I didn’t get an inspection for the foundation?

It’s an honest mistake and I am not sure how I should respond? Breaking out the concrete just for them to inspect it might be tough as we already framed the garage and walls in the addition. Any advice would be greatly appreciated!

Just bumping this old thread from earlier this year. For rental grade (LVP flooring, simple subway tiles, quartz counter top, lower end appliances), what cost per sq ft are you seeing? I’m looking to build 5 townhomes on a lot in Lower Greenville area. 

 Also when I submit the plan and waiting for approval, are there anything we can start working on? Can we do the framing of the new rooms? Can we knock down the load bearing wall with the engineer report? Or the sewer line replacement?