All Forum Posts by: Fabiola F.

I have an interesting deal on the table to join a pretty significant multifamily syndication as a co-GP for 1,000+ units at a price tag of $130m+. Financing is in place as is an institutional equity partner. My position would be to raise the remaining equity of roughly $10-15m, which is about 12% of the total deal size. In exchange, I would come in as co-GP and get a small share in the sponsor promote in the equity structure in addition to a small share in the fee structure on the acquisition side.

I have a couple of investors where most, if not all, of the raise could come from. However, I'm thinking through how to position a possible JV with my investor so that I get in on his side of the LP deal and essentially get a larger share in the equity structure outside of the sponsor promote, OR is this asking for too much since the LP is bringing all of the capital to the table?

Also, in a syndication of this size, what are best practices to ensure that my small interest is not squeezed out in a capital call?

I guess my interest in a JV with the LP is to add more protection for my small share in the event of a capital call.

@Scott Roelofs For clarity, I mentioned the cost seg because I have been in discussion with a cost seg firm to do the study, and definitely not expecting my CPA to do it for me. I itemized every repair, improvement & purchase expense to make it easier to identify depreciable personal components in the event that the cost seg study wasn't done. 

I really appreciate everyone's input. It's provided a good balance of perspectives and clarity applicable to various scenarios. I could see where it could get tricky where intent changes during the year and having to reallocate at the point of change, which sounds like a lot of slicing and dicing. I don't think CPAs are lazy, but some (out of comfort) may take the route of the 27.5 allocation vs individually taking 100% bonus depreciation on the personal components.  

@John Morgan Instead of calling them lazy, I'll say that there are several classes of CPAs and mine is probably in the mid range. Some are moms & pops-like and/or don't have a specialization in real estate. So they may not be comfortable with more advanced methods like cost seg. Mine is the middle - large CPA/tax advisory firm with a decent size of real estate clients but more of a practice area in general business. Other CPAs have a core in real estate and they are quite comfortable with the nuts and bolts of the industry.

What happens if intent changes during the year. For ex, the intent was to renovate to rent but you instead decided to sell or got an offer to purchase or the reverse where you intended to renovate & sell but ended up holding & renting instead. This happens often with flips that don't sell as anticipated and the owner decides to rent it instead. 

Thanks @Lance Lvovsky. I'm still trying to understand why my CPA would suggest that improvements would go into the cost basis and not fully expensed, and this is where we're not seeing eye to eye. I asked for examples of instances where this would be the go to method. His response is that if the property is acquired with one intent (i.e. to sell) but the intent changes in the process (i.e hold, rent, etc). Does this sound accurate?

This is a case of where my accounting MBA background plus what I read online is in conflict with my CPA's  knowledge. 

In filing my business returns (S-corp), my CPA seems to think that renovation expenses should go into the cost basis of the property instead of being categorized as improvements that can be depreciated. My CPA is also wanting to depreciate the entire renovation expense over 27.5 even though there's personal property components with a 5 yr depreciable life where we could take advantage of 100% bonus depreciation.

I argue that improvements shouldn't go into the cost basis and instead as operating expenses since the renovations were done under the normal course of business especially since a nice chunk is for labor/contracted services as well as actual improvements, material/supply purchases and personal property components (i.e. carpet, appliances, kitchen countertops etc). Backgrounder: I haven't done a cost segregation study, but all of the expenses have been carefully itemized to show expenses for the different categories so that it's easier to see what's depreciable. 

Also, the property was eventually put into service as a vacation rental with additional purchases made for personal property components that have a 5 yr depreciable life for the 100% bonus depreciation. And again, my CPA isn't depreciating this components. 

Where are we (either of us) wrong?

Of course I meant you @Michael Ealy...blame autotext...but either way, expect me to follow your progress. I look for guys like you that's in the trenches and not afraid to share your experience - good and bad. 

Great inspiration @Michael Blank. I've found a proven developer (through networking and personal introductions) with decades of experience doing capital raises from both private and public funds (i.e government pension funds) and your post excites me, because the developer and I are discussing a JV with him doing the capital raises since I've found a few strong deals (100-150+ units). I also have another broker in NY whose clients are foreign investors and private equity managers, and we're collaborating on bringing some of his investors to the table to pitch one of my deals.

The upside in being in a male dominated industry and being fairly younger than most of the men who've built their career doing this is that I find that a lot of men are happy to see a woman at the table and are more open to sharing the wisdom. Sure people will say being attractive helps but most seasoned investors that I'm meeting believe in succession planning and bringing newer emerging developers into the fold. 

So please keep sharing!

Thanks @Costin I. For clarity, I don't use the LLC for anything more than separating the property from me personally, but I lost that when I had to transfer the property out of the LLC and to my name during the refi.

I'm aware that an umbrella policy is needed regardless, and that land trusts are not protection plans. I was considering the land trust as a layer of anonymity to transfer the property back out of my name and as well as for estate planning.

The tricky part that I'm uncertain about is whether or not anonymity is void at this point even with a land trust since title is now held in my name and there's a trail as you mentioned.