All Forum Posts by: KC Frank

Hi there experts. Hoping to get guidance and info on a new partnership.

I am going to be the financing arm of a new build and sell business. My partner will be general contracting at no cost, although he will be paying a few key 1099’s and contractors . We plan to split profits at the end (I am charging interest).

Thoughts? Strategies? Pitfalls? All comments and guidance are welcome.

Thanks!

I can send you my construction agreements. he shouldn't build for nothing and you shouldn't fund the whole deal. there's got to be some equality. I'd recommend a minimum fee like 10% and you charge interest and points that are equivalent to market conditions, you also get the first guaranteed 20% profit as the only capital partner. make sure to take title in a single purpose entity and dissolve it after you build. I'd be happy to look at the construction numbers. partnerships are tough, it's better to be transactional with both people happy with initial terms and not counting on a sale. we do partnerships like this in COLUMBUS OHIO and miami florida and I'd be happy to help advise. how much experience does the GC have with new builds?

Very helpful Robert. Thanks!

He was a carpenter for 10 years, then a GC on both residential and commercial for about 10 years. He quit the business for a while but kept doing side jobs. Now he wants to run his own crew and do his own thing.

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Quote from @Benjamin Aaker:

Make sure you have all the tasks for this business determined up front. Who is going to do all the paperwork, like keeping the LLC renewed? Will the person get paid for that? I'm not sure what you mean about charging interest. I think splitting the profits is fine as long as your partner has worked out how much the labor will cost. That's a significant number that he will be paying. On the other hand, you are risking the money and that's worth a lot. Do this first deal to completion before starting the next one to see if it works out.

Thanks for the reply Benjamin. We agreed that the GC partner will setup his own LLC and bank account and I will fund. I am not an owner in the LLC. The business will be owned by the GC. The idea behind this is that I finance a few deals and then he eventually does everything on his own.

What I mean by interest is that I will act like a bank and will charge interest as money is being pulled and used, similar to a build interest-only loan. The difference is that he will not be making any payments on that cash during the build.

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Thoughts? Strategies? Pitfalls? All comments and guidance are welcome.

Thanks!

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Quote from @Mike Lambert:

@KC Frank

Sounds like it'll be for a large part a lifestyle purchase, which makes it easier. However, when it comes to cash flow and appreciation, there's something important to understand. In such a vacation market, cash flow and long term value oftentimes go hand in hand. It's not like in the US where you have the cash-flowing low appreciation Mid Western-style and the negative cash flow high appreciation Californian-style market. If there's no cash flow, there's not much long-term property value increase because very few of the kind of properties that you'd buy are primary homes and therefore they don't have that intrinsic value. This is especially true in a resort, in which no home would probably ever be a primary home. So, the long-term value is closely tied to the cash-flow potential.

When it comes to the whole area, that ship has sailed in my opinion. Of course, I don't know what your time horizon is. The long term price trajectory will partly depend on whether the sargassum issue can be contained or whether it gets worse and on how much overbuilding eventually takes place.

If you want to be in a resort, the resort is more important than the location in my opinion. Most people won't care if it takes 10 minutes longer to go to a resort if it is better. I tend to put my mouth where my money is so, if you don't want to be in a resort, I'd go for Playa del Carmen, which is easy access from the airport.

Something important to understand is that your guests (and yourself) typically will have to pay to use the resort facilities. If they want to use the resort more than once or twice during their stay, it's probably gonna be cheaper for them to take the all-inclusive package. In theory, this could work if the resort is for example close to Playa del Carmen, your guests want to use it once or twice and go to town the rest of the town. Problem is I'm not sure how many people would do that since you typically have the resort lovers and the resort haters and people who want to enjoy Playa del Carmen typically want to be downtown and take advantage of the walkability. So, if I was to buy in a resort, I'd want proven cash flow at the very minimum.

All very helpful Mike. I appreciate the insight and see your point about the relationship between cash flow and appreciation.

Thanks.

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Quote from @Mike Lambert:

@KC Frank

Sounds that this kind of opportunities would work for your lifestyle but make sure you understand how much money you're going to make and what the rules are, as it might be way less than you think and also there are rules attached to your investment that are outside of your control. I've been investing in the area for years and always avoided them like the plague.

Also, if it was me, I'd put my cash in a more profitable investment and stay at an all-inclusive resort "for free" using the profits of that more profitable investment. These resorts are cheap so I rather be the renter than the owner. Moroever, it'd be better from a lifestyle point of view as I can stay in a different one each time and so it would be way more exciting ans less boring.

Howdy Mike and appreciate the reply.

We invest in areas we want to visit and we visit our places relatively often. We'd like to find a place to call our own and don't care about visiting other places in Mexico. We've been to Mexico many times and would rather find a place to call our own. We typically pick a market, then run the numbers on what to expect from our investment in that market. We're more focused on long-term value than cash flow and are comfortable with negative cash flow at the beginning as long as the deal makes sense.

Do you have any thoughts on the region I mentioned? Any hot areas and/or better performing towns in the region? We prefer to stick around Cancun airport as much as possible.

Thanks!

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Quote from @Sebastian Papworth:

Quote from @KC Frank:

Hi there! My wife and I own 3 short-term rentals in the US and are considering buying something in Quintana Roo - Cancun, Playa del Carmen or possibly Tulum. Cancun is an easy flight from our hometown, we've visited those areas many times and my wife's family is from Mexico so she speaks Spanish.

Question - are there opportunities to buy in an all-inclusive resort? We've been to many and really love the feel and amenities. I'm just curious if there are options in those types of resorts or not. I understand that there are condo/apartment opportunities but am more curious about the larger all-inclusive resorts.

Anything else we should be thinking about when investing in that region? We don't need assistance with financing and will very likely use a property management company (even though we self-manage in the US).

Thanks!

Hello KC Frank,

Greetings! I'm a seasoned developer, investor, and realtor with over a decade of experience in the Riviera Maya. I’ve had some experience with all-inclusive Condo-Hotels in the region. While they might not provide the highest ROI, if you're looking for a more lifestyle-oriented investment, there are options available that offer full ownership with returns covering expenses and could provide cost-free vacations for you and your family.

I would caution against most timeshares, private residence clubs, and fractional programs, as they often come with limitations and challenges in resale. Instead, I can share properties that have proven to be lucrative in the short-term rental market, including those benefiting from the new Mayan train and Tulum International Airport developments.

If you're interested, I'll send you details on available all inclusive condo-hotel properties in Quintana Roo, along with price lists and availability. Feel free to expect a DM from me soon.

Best wishes from the Mexican Caribbean,
Seb.

Hi Seb. Appreciate the info. Please DM me with additional details. We're not as concerned with cash flow. We want something of our own there for visiting and are looking at the long-term returns. We do prefer adding our own design to places, but we understand many of those resorts/HOAs have uniform design in every unit.

Thanks!

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Thanks!

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All Forum Posts by: KC Frank

KC Frank has started 2 posts and replied 7 times.

Post: Structuring new build partnership

Post: Structuring new build partnership

Post: Structuring new build partnership

Post: Interested in Quintana Roo Short Term Rentals - All Inclusive Options?

Post: Interested in Quintana Roo Short Term Rentals - All Inclusive Options?

Post: Interested in Quintana Roo Short Term Rentals - All Inclusive Options?

Post: Interested in Quintana Roo Short Term Rentals - All Inclusive Options?