All Forum Posts by: Jim Groves

I applaud your idea of giving back, just a couple thoughts on what you're thinking about vs. what's already out there:

- Roughly half of the affordable housing developers are set up as 501c3.  The "profits" come from developer fees and any returns generated by the GP interest.  They are usually rolled back in for future developments

-New Story newstorycharity.org is a company that came out of Y Combinator and has a very strong track record of developing homes for earthquake victims in Haiti.  I am a big fan and would encourage you to watch them as they have created a great business model.

Maybe, but you should know that you wouldn't get the benefit of the NOLs unless you qualify as a real estate professional according to IRS rules.  If you don't, you're paying taxes on the interest without the NOL offset.

I served as the CFO for a LIHTC non-profit developer.  Best guess is that they were in the business for 10 years prior to my work with them, and its hard to say how difficult it was for them to get their first award.

Yes, things differ from state to state and for most I believe that the awards are almost always allocated to prior recipients.  This does not mean that it is impossible, but know going in that your first one may be the toughest.

I do know that California allocates a lot of smaller credits so that should increase the chances of a new organization getting an award.  My best advice is to reach out to the California Housing Finance agency and see if they have any upcoming presentations on the QAP.  Most states try to make the process as transparent as possible and offer public sessions on their QAP process.

My perspective from someone that tried to navigate and profit from the 07-08 crash:

- Hold lots of liquid assets (i.e. cash) to be in a position to purchase discounted assets.  A lot of people pitched ideas to take advantage of the crisis, but most of those were just pitches. Bank financing was non-existent and most of the real estate professionals were already dealing with their own underwater assets.

- Avoid auctions whenever possible.  This is a tough one as the last downturn was far more orderly and competitive than the early '90's RTC days.  I was surprised at how many bidders there were for assets, and discounts were not as dramatic as one would think.

- Look for assets that are discounted due to lack of investor demand, not lack of tenant demand.  This can apply to any company or product.  Some of the least sexy assets can be the most profitable, simply because they fly under the radar of institutional investors.

There were certainly a lot of people that made money in the past downturn but it was nothing in comparison to the wealth that was transferred in the early 1990's.  Information is more widely available, and technology has created efficiencies that were non-existent 25 years ago.    

@Jeff Hursey

Illinois has an intrastate crowdfunding law, which allows for non-accredited Illinois residents to invest in equity crowdfunding.  However, I am not aware of any platforms that specifically use Illinois law for real estate investments.

There is one platform that I'm very familiar with called Vestlo (just google it).  They currently have a real estate investment listed, and I know they speak with local developers about posting new projects.

Good luck

At a high level, I think you're overly optimistic on a few things:

Downtime- looks like the equivalent of less than 5 months for an 8 unit building. Unless you're in a high demand neighborhood on the north side, it will take 1-2 months to release upon expiration.

Property Taxes- WAY off.  Maybe there is a break in the south side, but figure 2.5% of building value. A unit worth $800K in the north side pays at least $15K in taxes. You're likely closer to high teens.  You can verify this on the Cook County website.

Utilities- I'm assuming tenants pay their own. If that's the case, you're probably pretty close.  Water tends to be a big miss but you're pretty conservative there.

Fair point, but if you dig into the prospectus of the first Fundrise offering, they employ the same strategy

 I was referring to mortgage REITs, several of which are referenced in that article.  

 The prospectus should tell you when the dividends are paid out, but in order to be competitive with public REITs, they probably pay quarterly.

However, just because they'll take $1K doesn't mean it's a good deal when you factor in fees.  I invest in debt crowdfunding platforms through a SDIRA. The annual fees charged for the account can be pretty high as a % if I only invested $2K.  

Also, given the high dividend yields I'm seeing in the REIT space, I don't see how Fundrise and Realty Mogul eREITs make sense. 8% is fine and all, but 10-12% is better. And I can find those yields on multiple REITs with better assets and better managers than Fundrise and Realty Mogul. And if they're publicly traded I can sell any time I want. Unlike these eREITs which offer no liquidity.

RE: the "long term hold", the whole point of the 1031 is to delay the cap gains for the long term. Eventually you will need to pay the tax.