All Forum Posts by: John Sayers

On the high level topic, just as "Leverage Local Expertise" and "Lack of Local Knowledge" are on both sides of the coin, so seems the "Tax Benefits".

Comparing deals with basically the exact same return numbers can potentially net different results to one's income depending on if the asset state has an income tax, your tax position, and how it is applied etc. Particularly if one lives in a state with no income tax, or, the other deal to choose from is in such a state. The added tax prep costs, filing in multiple states, time, potential state tax law change, and the potentially lower net income are things to consider. Granted, it may be a nominal delta in the end. Just factors one may consider.

Varies by City, or used to. For example, Austin just got hand slapped by the courts for basically banning (severely restricting) the non-owner version so it's only now back to more open than closed market. I'll defer to the STR players though.

Quote from @Connor Cogdill:

Quote from @John Sayers:

Looked like 5.6 Cap at a quick glance. Likely lower.

 @John Sayers Maybe so. Is that going off the rule of 50% expenses? I’ve seen in some mobile home deal analysis that seems to be the off the napkin approach to MHP analysis. 

I didn't touch expenses, was just a super, super, fast estimate to adjust for POH only. Other DD considerations seemed to be likely to lower it but that's TBD.

Looked like 5.6 Cap at a quick glance. Likely lower.

Seems 98% of "alignment of interest" topic are presented by the GPs of the world. That alone is a flag to consider; to be aware of potential systemic bias.

GPs who subscribe to ALL the "standard" fee types are a flag. They may target more unsophisticated investors and/or the very busy ones. 

"When" fees are paid and "how much" are important components to the elusive alignment. Some legal teams put the GP first in all things. In doing
so, there are many good sounding deals that are written up by legal that will always end for GP/LP as either win/lose, win/break-even or win/win. That's not the best alignment, yet some will think it is.

For example on just one fee type: if a deal reimburses the GP team at closing for all the costs incurred up to closing, the additional acquisition fee is then basically 100% profit on day 1. The larger the deal, the smaller the % should really be, or a flat fee. Some are playing the % game on larger deals, pulling in $600-$1 Million+ profit on day one. No matter what the deal does, $3/4 Million at close can encourage a transaction mentality of "more deals", "more deals", to feed the need for quick $$. Focus is not as likely to be on running the deals.

Many a GP says the LP is "paid first" with a pref, yet that usually overlooks the potentially large mix of closing fees. It's "true" though as they are talking about the flow after closing, and not from the day of the wire. Maybe LPs should ask GPs to share the GP's IRR/ Multiple, COC, ARR. The transparency and clarity could be refreshing.

For sure, GP's need to be rewarded and compensated! The method and means should be remain reasonable.

As a LP, one way to look at it is if a deal was a 2 party JV, what terms would you accept or reject? Maybe look at the capital stack, returns, legal, fees, splits etc. as if you are the sole investor putting in the total raise. Would you still accept the PPM/OA terms? If not, then maybe it's not as aligned as it may initially seem.

In the end, there is no perfect sweet spot mix of the parameters. The GP's skills and ethics are most important when the tides are receding. 

CrowdSteet was mentioned with a clear disclaimer above. I'd add that such platforms can infer due-diligence is done by them, but one is still on the hook to do your own DD.

I'd propose most crowd sites are in it for the transaction fee, juice, vig. They look out for you as much as a wallstreet clearing system looks out for the billion traders per day. Very very limited.

CS has also been in recent news over big cases that are not very flattering.

https://therealdeal.com/national/2023/07/18/crowdstreet-resp...

or WSJ (paywall?)
https://www.wsj.com/articles/missing-millions-and-a-rabbinic...

response by CS (don't blame us)
https://www.crowdfundinsider.com/2023/08/211163-crowdstreet-...

TLDR but monitoring for POVs of players in the arena.

I know of fires in MF and they had the correct insurance (Vs any insurance) that paid for rebuild and lost revenue. 

Thanks @Bruce Lynn ! I hear you. The legislature could better define it in the code to avoid some of the nonsense, but they have not.

Hennepin County sure seemed to be trying hard to keep the excess funds. Sad but good it went to SCOTUS.

The best thing I read all week was the funny sad and amazing  W Tx  Loving County politics and drama. SMH.

@Bruce Lynn Good stuff. Are you confirming that some non-homestead (not filed for) residential properties are redeeming up to 2 yrs? I've heard of places granting claims even though the property was never actually filed as a "homestead". Seems like the code 11.13 (j) & (l) does not seem to require actually registering or claiming homestead exemptions. Or am I off?

".so no real reno during the 2 year hold period....and they're all probably a 2 year hold even if you think it is six months. and while I
say no one redeems.....you do a nice reno before the 2 years is up, I can almost guarantee about a month before, they're going to redeem.
"