All Forum Posts by: Libby Tucker

I agree with @Keri Carpenter.  You can cash flow on the property so don't sell it.  It's tempting in a great market. But the market will be hot again in 10-20 years and you'll wish you'd hung on.  I sold prior to 2008 and 2 other properties too early and would have had 800k in equity 14 years later had I hung on.  Figure out rentals, it's your passive income strategy.

Thank you all for your advice this is very helpful!  The house would net 500k, my loan is 180k and my IRS debt with fees is 70k.  That would leave me with 250k to reinvest.  I agree that the value means less purchasing power in future, good point Willie, and I'd like to have the cash to invest and be out from the IRS lien, like you said John it definitely weighs on me. 

I'm on the fence about a property I own in the south side of the city of Seattle.  The property is 1600 sq ft livable space, with a single car garage on a 6,000 sq. foot lot.  It's 10 minutes to downtown, 10 minutes to the airport, and 10 minutes to the beach.  On a bike trail.  The light rail is expected to go through / close to the area in 2030.  There are many new businesses opening up down the street and younger DINKS moving to the neighborhood.  

The downsides - the house is on a dead end street near the freeway and has freeway noise.  The neighborhood is turning around but there is still petty theft, squatters, and drug houses in the area, even though it feels relatively safe, it's not a high class neighborhood, however, artists have moved in and are making it trendy, the first step I think to good growth.  But this side of town is near a super fund site with polluted soil near the river banks, it's in a valley, which also means it's technically in a flood zone.  The basement plumbing isn't great and I've had issues with some minor flooding.  

I had divided the upstairs and downstairs into 2 separate units, on the same meters, and was renting it out as separate units, which, the city said would be okay apart from the height of the ceiling, which is just a few inches under regulation height.  So, I lost rental income by not renting out the bottom.  And, I lose money in repairs when it floods. 

The area is zoned L2 high-density. I am approved to build either an ADU/DADU or 2 townhomes on the property.

I am in between these decisions: 

1) keep the property.  As-is, it rents for $2,500. 

2) keep the property. Lift the basement, fix it up, return it to 2 rentals 

3) keep the property. Lift the basement, fix it up, build an 800 sq ft 2 bedroom ADU. Rent out as 3 separate units for $2k/each. Cost approx 250k to build/fix so I would need to hold on for 15 years to get money back.

4) sell the property.  take a hit on capital gains and pay off my IRS debt/lien 

5) sell the property. pay off debt. roll proceeds (approx 200k) into a 1031 and find a different market to invest in, with lower growth potential perhaps but no flooding, no construction to manage, no tenant etc.  

I'm also taking care of my mom out of state who is very ill.  I also realize that if I leave the Seattle market, I won't be able to re-invest back into it as prices are soaring.  I also believe that when interest rates go up, the market will stabilize and likely crash in less sustainable areas. 

It's a tough decision and I'd love to hear what this community thinks.  Any thoughts? 

I'm looking to nail down a good deal structure for my situation. After a ton of research it seems that it just comes down to a case by case basis. So, here's my case:

I have a co-living business. I'm looking for properties (ideally slightly distressed and currently in South Bronx and East Brooklyn in case anyone knows of any).

At the moment I have little to no capital to invest.

An investment group approached me about going in together on the next property. They are experienced deal finders who generally seek outside capital and focus on getting great returns for their investors.    

Together we have identified a property that will cost all in purchase + closing costs $800k.

• NOI $77,129
• Cap Rate 9.64%

The average cap rate for the area is 4%.

Built into the expenses are all utilities, amenities, plus an on-site management fee. I have not yet built in my cost.

My Value:

Property management and general construction expertise

A large network of high value tenants with the ability to fill spaces quickly

Ability to get above-market rents

Manager on-site to maintain high value community

Hands on management with track record

Their Value:

Outside capital

Experience with the Department of Buildings, including building codes and permits, and removing violations

Track record with local lenders

So... 

How do we make this a win-win, or, in the case of also satisfying their investors a win-win-win? 

Considerations:

What happens if something goes wrong on the property / needs repairs

Who is liable if we get sued

What if we need more cash to infuse into the business for whatever purpose

What if someone wants out of the contract

This particular group of investors want a promote from their investors along with, I believe, a property acquisition fee and an annual fee.

It's my understanding that normally you structure an LLC for 2 parties - investors (Limited Partner) and sponsor (General partner) and the GP gets the promote.

Would I ask to be part of the LLC structure as a GP of this group? Or, would I be a 3rd party and ask for a secondary promote?

This group, obviously, wants to share in the upside of higher market rents. Because I do not have initial upfront capital to invest, I want to offer a fair split of the net. I also need to make some money to prove the model, be able to survive, and to recruit more partners for more deals.

Also, I’m a real estate investor. Aside from my business, I want to grow my portfolio.

Questions:

How should the LLC(s) be structured? 1 on the property and 1 on the business, plus an additional 1 to represent 3 parties separately? Or do I group in with the investment group as a GP?

What is a fair equity split on the property?

What is a fair split of the net revenues?

Could there be goals or milestones for which the profits and/or equity are increased for any or all parties?

How can all parties not investing capital benefit from a promote / sponsor fee?

I also am building a network of private equity partners and lenders. In the near future, it seems like it would be less messy to go that route / work directly with private money and then a lender.

Should I work with private investors directly and skip this deal? The benefits of this structure are that, even though I get less upfront, I get to expand my concept and my track record.

Sorry for the long post. Helping point in any direction, and any introductions, will be very helpful, as the more I read, the more lost I get and I want to clarify before I pay expense attorney fees. 

Thank you.  

Looking forward to this event and seeing everyone / meeting new people.  Thanks Ceaser. 

Thanks @Leon Manoff and @Audelle Bodie.  I always love connecting and meeting more people so yes please I'm always open for connections or introductions.  I am looking for real estate attorney advice currently in NYC.  Thank you.   @Audelle Bodie you're in 3 states?  As an investor or lawyer? 

Thanks for the suggestions! 

I'm working in Bronx and Brooklyn.  

Looking for some recommendations for a New York attorney to create and structure LLCs - for existing properties as well as forming an investment group or partners to jointly put in capital on a real estate project.  

Looking for someone who has a lot of experience doing this and knows the ins/outs and pitfalls - what to do and best ways to structure deals so it's a win-win-win.  

Thanks! 

This is awesome thanks so so much!  I am in the middle of putting together before/after pictures and numbers.  Do you know where I can find an example of a good investor packet?  I am just putting a bunch of stuff together and hoping for some feedback.  

I also have pictures of the 3 family I mentioned, I was able to tour it today, so I'm putting together actual repair estimates from just having completed the house next door, albeit a 2 family, it's identical.  

I live in NYC I need to update my profile. I spend time in Seattle when my houseboat isn't rented. I have a PM taking care of my SFR in Seattle after self-managing for 10 years.