All Forum Posts by: Ian McDonald

Justin Folkins Will do and thanks for the reply.

All good information. Does anyone utilize a checklist when taking calls from prospective sellers in order to maintain consistency and gather only the needed preliminary information? 

Hello, I’m looking for possible contacts in the Spokane area that might have some insight to off-market multi family properties. 30+ doors preferred with value add possibilities. Also, are there any meet ups scheduled anytime soon? Would love to network and meet some like minded folks! Regards, Ian NSRE

@Todd Dexheimer

The syndication return info is useful.  We are only seeking one investor syndicate on this one $100k of our own capital and $100K of their capital @ a 11.5% return on their investment.  Preferred is something my partner and I discussed on this deal in particular but is not set in stone.  

Originally posted by @Todd Dexheimer:

Details in this one are hard to comment on. You mentioned putting 50% of the equity in and a 50/50 split, but later mention that you are not giving a 50/50 split. What are you giving? 11.5% preferred return is really generous. You are going to pay you investors 11.5% return before you take any money?   

The 50/50 split is on the initial down payment only.  The 11.5% is certainly generous and the preferred status isn't set in stone.  My main question is what is the average return for and investor if 11.5 is really generous?

@Jeff Greenberg Good catch, been running numbers all weekend and got foggy.  12 months not 10.  

I should have been more specific in that the 50/50 split is only on the down payment, NOT on the return.  We are doing all the work on this, the investor provides capital.

On the guarantee thanks for the advice. 

On your last question.  We have an owner financing agreement with the owner that is more interested in a monthly income in retirement. On the capital reserves we are waiting on a the report from general contractor and inspections to assume and a rational number here but we have over $400k to allocate from for reserves.  First year insurance is included in our expenses and will come out of our capital up front.  This is a fully occupied property so operating expenses will be covered by rent roll.  

Thanks,

Ian 

Hello,

I want to give a little back story before I state my question.  My partner and I came across a potential deal through some diligent searching and mailers throughout the last year (patience is a virtue they tell me).  We received a phone call from an older gentlement set on retiring and wanting out of his aparment complex with 34 units.  We got ahold of the financials and quickly realized this will be a a small goldmine.  He bought the property in the late 70's and hasnt done much renovating in that period of time outside of normal wear and tear replacments meaning we went in one room and it still had shag carpet and popcorn ceiling, you get the idea.  He stated he hasnt raised rents in a decade because he feels for the tenants which is admirable but not a very good business/cash flow position to hold.  This project has value add all over it with rents well below the median for the area so we are talking about aquiring an underpriced undervalued property that will require mid tier renovation and rent increase to median that would put us with close to $1m equity and favorable cash flows within the first three months after acquisition. So to my questions....

Our vision all along has been to utilize private capital along with our own at a 50/50 split in order to make the downpayment and finance the remaining traditionally which seems pretty straight forward. 

What is an average rate of return for a private investor? We plan to offer at least 2% more to beat the market and retain investors.

Do you calculate the return for the investor based on the cash flow after expenses per month?  For instance we bring in $10,000 cash flow in January so the investor (paid first) would pocket $1150 per month and $11500 annually while my partner and I take the remaining.

Upon sale of the property, what is a reasonable return to the investor based on appreciation we gained over the life of the acquistion? Meaning we want to provide a "bonus" to the investor above and beyond the 11.5% return guarantee once we sell.  For example we purchase for $1.28M and sell for $2.5M. 

The deal would look like this:

Our Capital - $100,940

Private Captial - $100,000

Purchase Price - $1.128M

Private Capital Rate of Return - 11.5% (preferred)

Plan to return $100k back to investor after 2 years when we plan to refinance.  This would be $23,000 in return over two years for the intial investment.

Thanks in advance for your assistance/guidance.  Love the wealth of knowledge this site offers!

Ian

@Wayne Brooks

So if I owned a $100k property and it depreciated $10k over 4 years and I sold it for $100k I would be taxed $10k capital gain and also add the $10k of depreciation to my normal income tax?  

If not can you give an example of how it would work?

Hello,

Is it just me or does depreciation recapture and capital gains make real estate seem less lucrative or attractive than it used to?  I'm not to keep on losing 40% of my hard work to the government.  I know 1031's are an option but how do you ever realize your profits if the result is a 25 - 40% loss of the gain?  Pretty disappointing.

@Amy Sill

Hello there, I grew up in Estherville, IA home of the Midgets.  I saw that your from Spirit Lake and I have been contemplating purchasing a rental property back there since I know a few people who could do the property management for me.  How is the market right now?  I know the property on and around the lake is high but not sure about the rest.

Thanks,

Ian