All Forum Posts by: Jeff D.

Hi all,

Been looking at typical syndication structures and have seen a common one is to offer an 8% preferred return and then 70/30 the cash flow above that between GP/LP's.

My question is, what is the 8% preferred return based off of? 8% preferred return on the original equity contribution? 

What's the difference between a preferred return and an IRR hurdle? Besides the fact that they're two different metrics, don't they basically serve the same purpose, to establish a threshold to be met before a promote incentive can kick in?

Thanks for clarifying!

Thanks for the clarification @Charles Seaman! Assuming you're using a lender who's underwriting based on LTV, is this where a bridge loan would come into play if you didn't have the funds to meet the CapX reserves required by the lender?

Also: I've seen that 3% of the loan amount is a good assumption for closing costs. Any other good rules of thumb you can think of that a syndicator would need to keep in mind when raising capital besides that 3% and a 30% equity contribution assumption?

Hi all,

Been doing some research about the multifamily closing process and was wondering the following: Do your escrows for Insurance and Taxes come out of pocket? Or can they be included in the loan amount? How about CapX reserves... part of the loan amount... or out of pocket expense?

Thanks for taking the time to clarify!

Hello fellow BP Readers,

I'm in the process of deciding where to set up my first LLC and I'm intrigued by Texas and their Series LLC. However, I will not be making my property purchases in TX but rather GA.

I'm aware that if I open an LLC in one state and intend to do business in another, I will have to register my LLC as a foreign entity and pay the necessary fees.

My question is, if I opt for the convenience of the Texas series LLC, will it hinder my ability to obtain financing from local community banks in GA? Or would it be in my better interest to forego the convenience of the TX Series LLC options and instead register my entity in GA seeing as that's where the properties will be located?

Thanks for you help.

Thanks for your replies @David Dachtera / @Jessica Zolotorofe !!

David, I have some more research to do into trusts, but I am intrigued by being able to establish ownership of an entity by another entity rather than myself personally. I've heard revocable trusts are a better option than irrevocable as they are less complicated and offer the desired anonymity?

Jessica, I'll be sending you a colleague request as I have some further questions you may be able to shed some more insight on. Thanks for your response.

Hello fellow BP readers,

I'm currently looking to set up my first LLC's to begin commercial multifamily investing. I've been doing my homework and i've come to the conclusion that it's in my best interest to establish multiple LLC's for asset protection purposes. I've come to understand that I should establish an LLC for purchasing the property, operating it, and for all business dealings and another separate LLC to simply hold the asset. Any LLC I set up will have a single owner LLC structure.

Can someone expand on the relationship between these entities for me? How do I draw money from the property and distribute to myself? If i establish an LLC for each property, doesn't using a holding company for the properties defeat the purpose of separating them, if they end up just getting held under one entity in the end? I plan to consult an attorney to answer my questions, but in the meantime I'd like to walk into that meeting down the road with a clearer understanding of how this strategy works.

Thanks for your help.

Thanks for taking the time to try and help educate us newbies @Account Closed. I'm located a little further downstate than you are, Westchester, currently looking to invest in small multi-family properties in the outer boroughs. I'll be sending a connection request, I'd love to pick your brain if you've got time.

@Cody L. ... echoing @Ben Wilkins thoughts, I'd love to hear about your experience with the ugly ducklings. I too find location to be more pertinent than the current classification of a property, as those variables can be changed, while the location obviously is what it is.

@Kory Clark just my two cents, @Joe Splitrock nailed it. As young investors, the time is now to build the lifestyle we want to live. By reinvesting your profits back into your business you may be delaying instant gratification, but you're setting yourself up for long term success. Right now I'm not concerning myself with aspirations of quitting my job and living off my rental income, I'm more concerned with acquisitions and growth. It sounds like you have a dream of early retirement, as we all do. I think the best way you get there is growing your company by reinvesting your available cash flow, I'd only withdraw money from your business if you absolutely needed it and it was an emergency. Discretionary spending is something I fund from my job, not from my investment portfolio. Every dollar I save in free cash flow now is hopefully multiplied 100 fold when I reach my goals later on. 

Hi everyone and thanks for taking your time to help me with my question.

I am familiar with commercial properties and the advantages of an LLC formation, however I have recently thought about entering another market and owning some residential multi-family housing. From everything I've read with an LLC structure financing is impossible from Residential lenders, which makes perfect sense. So i've decided that I would like to pursue these properties using my own name and adequate umbrella insurance coverage.

My question is, for those of you who own Residential RE in your name, did you/ do you set up an LLC for Property management purposes if you're going to be managing the properties yourself? I'm thinking that I'll purchase the property in my name to take advantage of the better financing from lenders, but I'd like to set up an LLC to manage the properties so as to set up a business checking account and separate finances from my personal accounts. I'd love to hear what you all do or think of my idea.

Thanks.

-J