All Forum Posts by: Jonathan Makovsky

Hi @Joseph F. ,

I want to preface this with that I have not done this myself yet, so there are definitely better people on BP to help you out. With that said, here is my understanding of structuring deals:

• "How is ownership of the property held?" If you're placing the property in an LLC, then the LLC owns the property. All profit and loss allocations will be based on the operating agreement. It would probably be best to hire an attorney for the Op. Agmt.
• "What percentage of the property is fair for me to own?" Going back to the question above, assuming the ownership of the property is in the LLC's name, then the property will be owned by the LLC, but that is less relevant than the operating agreement which defines the profit and loss allocations. So if your next question is...
• "How should I set-up the profit and loss allocations on the operating agreement?" The first thing to consider is every investor is different and has different appetite for risks - or might even have other considerations in mind - so no two deals need to be structured the same. Try to put yourself in the investor's shoes and run the numbers on a deal based on the different splits you mentioned above and see if you feel comfortable asking an investor to invest based on those numbers. For example, if you find a property that can return 30% cash-on-cash a year, then you might be able to easily find investors to split the profits based on a 50/50 split every year. However, if you find a deal that's returning 3% cash-on-cash you are probably going to be hard pressed to find an investor based on the cash-flow alone.
• Also, as Dion mentioned above and others mentioned on BP, you should always put a management fee in your underwriting regardless of who manages the property - assuming the quality of work is the same. The allocations on the profit should not consider a property management fee. A property management fee is an operating expense.
• Final comments: The best way to get a larger percentage of the deal is to find the good deals, because the better the deal the more leverage you will have with investors.

Hope this was helpful.

Happy holidays @Joe Calisto

I am not a good source to provide names of insurance companies for quotes, but I have two colleagues that are insurance reps that can provide you with quotes. Please PM me if you're interested.

Happy holidays @Joseph F.

I think the answer will depend on the deal you bring to the investors. The sexier the deal you offer to your investor(s), the more negotiating power you will have in taking a piece of the pie for yourself. If you can show that your deal will provide the investor with the desired return that the investor is looking for, and at the same time you can take a piece of the action, the investor might be very happy with the structure. Especially considering that the investor knows that you'll have a strong incentive to keep the property cash-flowing,

With that said there are so many ways to skin a cat and structure your investor deals.

One way that I personally like, is offering an investor a cumulative preferred return and then earning a promote once the return is met. For example, give your investor a 7% cumulative preferred return - which means the first 7% of their investment will always go to them, and if in one year you don't meet that return then it accumulates to future years - then once their (7%) return is met, you can split the profits based on an agreed upon amount, for example 50/50.

Hope that makes sense.

Thanks @Adam Johnson. Is there a way to verify the numbers before going into agreement with the seller? (My initial question pertained to what numbers to use to make an appropriate offer.)

I tried calling the utility company in the past, but they said that they will not give out any information unless I am the owner of the property. Is there a way around this?

Thanks @James Syed!

Hi BP,

Is there a safe cost assumption I can use, for the price of gas per unit in the northeast? It is specifically for heat and hot water (tenants are responsible for their own cooking gas). Thanks.

@Steve Grace thank you for your advice - much appreciated from someone who has been in the business.

Shannon J.

Is anyone here familiar with the Middletown, CT market?

A real estate agent has been showing me some properties and I would like to know if there's someone at BP that could shed some light on this market. Thanks in advance.

@Raymond B. thank you for that - I thought I was doing something wrong.

Hi @Paul Springer, I have not used either of these attorneys yet (since I am still waiting to close on my first deal), but I received recommendations on both of these attorneys. Please let me know if either of them are good/helpful:

Michael R. Lowitt, Esq.

Lowitt & Associates, LLP

125 Mason Street

Greenwich, CT 06830

[email protected]

Ph. (203) 510-8354

Dawn M. Pearson- Attorney
203-488-8950 extension 104
[email protected]