All Forum Posts by: Fahad Rajput

 Thankfully I do have a landlord's policy so they are aware it is a rental.

Sadly, one of my properties burned down last week.

 I rented a legal two family to a related group this past September. 

Tenants were great, never late on rent (even during COVID), no neighbors complained.

Then this happened last Thursday:

I received a phone call from the tenant at 10PM after a late day at work that the house is on fire - thought they were messing with me. Thankfully everyone was ok, but this will be a significant insurance claim.

Lessons Learned / Lessons Reinforced:

1. Always Require Renter's Insurance (I mentioned it to tenants but was laxed in enforcing it)

2. Install tamper-resistant smoke/CO alarms that are hard wired

3. Do NOT undervalue your build cost on the insurance policy to save a few dollars

4. Make sure you have a Landlord Policy for your rentals and not a homeowner policy.

Questions:

1. I was told my homeowners policy will not renew and will be very expensive because I need to get it from New York State. Any experience with this? Options or Alternatives?

Following this post. Would love to hear success stories and lessons learned with this.

 Hey Al, thank you for the support. It's in East Flatbush, Brooklyn. Luckily, community wasn't an issue. Development is rampant in the area. I'm in the process of raising for another deal very similar to this. Will definitely post updates!

 I feel leveraging over multiple assets is always a great idea. With mortgage rates as low as they are right now (probably less than the rate of inflation even), I would definitely do the cash-out and look for another property.

This is an 18 month project overall since we purchased it with approved plans. I however bought in mid construction so expect it to be about 9-10 months total for me. The plan is to sell as a performing asset right after.

Thank you! Yes, I'm very excited to complete this. This is in East Flatbush. In the process of raising funds for another similar deal also in the area. Very lucrative location.

@Melanie Stephens

I have an interesting one. I develop large multifamily properties in NYC and do a random residential flip on the side with some friends.

Developments went great, flip ended up loosing money even though numbers were solid (I think any flipper would pick that deal up in a heart beat even now).

Basically, I focused so much on the development, raising capital and new larger deals that the flip took a back seat. The deal had so much margin that I was convinced I could be slightly relaxed with this and still make a ton.

Contractors ended up taking advantage, overbilled, underperformed, finishings were horrible and no offer went through. I also got stuck with maturity default interest because the hard money loan had matured, even though it was never late. Now I paid out most of the investors and hold it as a rental.

Lessons:

1. Multiple exit strategies

2. Flips are time sensitive - do NOT wait on anything

3. Be on top of your contractors if you’re not building it yourself

Hi Johnson,

This is actually right up my alley since I am a GP/Sponsor for real estate syndications in NYC.

My recommendations are as follows:

1. Assuming that they're filed under 506(c), the following apply. Other filings should follow a similar trend. Review the PPM (asset capitalization and value, risk factors, and "the about the sponsor" section). It should be consistent with the investment prospectus they had given you. Verify the information in PPM you received is consistent with EDGAR.

2. This is a tax question. As an LP, your risk is limited to your investment. Tax wise, it may be better to invest under a company (primarily for the sake of bookkeeping and segregating expenses related to your LLC's operations; investing in this case).

3. I believe part 1 of my answer pretty much sums it up. I'd be happy to discuss this further if you have other questions!

With Regards,

Fahad

Investment Info:

Large multi-family (5+ units) commercial investment investment.

Purchase price: $1,000,000
Cash invested: $3,200,000

A development deal converting an existing two family structure to an 8-family structure comprising of 6,000SF.

What made you interested in investing in this type of deal?

A developer seeks for value add opportunities in real estate. This is a deal where we were able to quadruple the livable units! Talk about value add.

How did you find this deal and how did you negotiate it?

This deal was presented to me by another developer that I have done a JV with before. He was a bit cash-strapped and I ended up buying in to the project mid-construction.

How did you finance this deal?

1. Through my private equity firm. To learn more about is, you can visit blacklistcapital.com
2. Through a hard money loan

How did you add value to the deal?

Converted 2 units, built up 2.5 more stories and turned it into 8 units.

What was the outcome?

Pending.

Lessons learned? Challenges?

1. How to navigate stop work orders during a pandemic - takes very long.
2. Cost-benefit analysis with some risks
3. New regulations for construction due to pandemic

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Just a co-developer and my attorney.