All Forum Posts by: Jimmy Klein

@Ronald Rohde Thanks this is great info. So I guess the best way to think about it is that a Delaware LLC is not really going to help much then? Probably just makes more sense to look at the yearly fees.

@Ronald Rohde So we have an individual LLC for each asset of course. I have varying degrees of ownership percentage in each LLC (property). That LLC (which includes me and other investors) will sign a management agreement with my management company. I have been handling all operations. There is no exit strategy for the management company since its just a way to collect a management fee. As for the individual properties, as those are sold, the management agreement would expire or be terminated. So thats why I am not sure if I need a DE LLC or not? Also with us having multiple assets spread over other states, if I dont do a DE LLC, which state would I create the management company in? Appreciate your guidance. Thanks.

Currently have a management company that handles the management of commercial properties in varying states including Texas, Florida, Alabama, and Tennessee. Asset types vary from small retail centers to hotels. Does it make sense to create a new LLC under the state of Delaware or would I be better of in just incorporating in one of the states we own in. I have heard varying info such as there really is not much of a benefit to some claiming it offers great protection. Anyone create a Delaware LLC or any attorneys that could briefly provide some advice? Thanks.

Got a nearly fully paid off $5.5 million asset, need a commercial equity line of credit for about $3m preferably (so less than 60%). Would need to draw down on it for future acquisitions and other needs as fit and will pay down quickly as well. 

We own multiple hotels with multiple partnership structures. Let me see if I can help you. 

You will have a very very very difficult time finding any partners that don't have any operational say willing to put up any guarantees for the loan, why would they? Step in their shoes. Why increase their liability without even having a chance to run anything. SBA would make the most sense for you, but you'll be on full recourse and they will come after everything of yours. As someone mentioned above, CMBS is great as non-recourse, but you will not qualify because at a $4 million deal won't be worth it plus they got strict liquidity requirements. We did a deal a couple years ago for CMBS and the principals had $1 million in a liquid account, which still wasn't sufficient, also they will have the ability to restrict cash flow/distributions/operating cash, etc. per the term sheets.

Regarding selling units , I highly advise you please don't do this or at the very least find a really good securities attorney, when you mention the word units or shares, the IRS has sensors that go off and if they find out your issuing shares, you will be in BIG trouble. The kind of trouble where your talking serious penalties for violating securities regulations. 

As someone else above mentioned, the bank is most likely going to have a tough time approving this given that this is a construction deal. I understand you have a relationship, but you need a commitment letter. A relationship does not mean commitment letter. If you can get one, thats great. 

With that being said, I commend you for trying, its always good to try, but just realize when your doing construction, issuing equity, and more importantly dealing with hotels, this is one of the hardest scenarios to deal with in the CRE industry.

As Greg said, at 5 rooms it wouldn't be worth it to hire someone to run it, it would eat up all your cash flow.

Yes done it on hotels. My group has bought a couple hotels and we were able to refi and get our invested capital back. Our investors were thrilled of course since we returned their investment back. This doesn't happen all the time, as someone above mentioned it has to be done on deals where NOI is higher than initially. In addition, your taking on significant debt so you have to manage accordingly.

@AJ Shepard

Thanks for the info. Makes sense that improvements should be based on actual structure value, not land. If it is true that the total value of improvements just need to happen over the life of the hold and not within the 10 year timeframe, I think OZs are quite promising. To be able to not only defer the cap gains from your initial investment, but as well as your new investment is amazing. 

@Max Ball

Ok so if I buy a $1 million property. I have to spend an additional $1 million right away or over the course of 10 years.

@Max Ball

So basically someone can just buy a property in an opportunity zone and do nothing as far as improvements and still get the tax benefits? Or do they have to do improvements? I am not seeing any language mentioning this. All I see is that an investment needs to be done.