All Forum Posts by: Mark Doty

@David Walkotten thanks for the details...really helpful!  Do you pay out on monthly/quarterly cash flow too?

@David Walkotten thanks for the suggestion. How long is your term on that loan?  Congrats on the 40 unit!  On the preferred return, are you looking at like 8-9% or more than that?

@Dan Handford understood on the syndication point. It’s a security if the partners don’t have another role in the deal, correct?  My understanding is that if the people investing (which doesn’t matter if it’s 3 people or 100 -I don’t think) don’t have an active role or responsibility outside of the money, then the deal should be structured as a security.  

After completing the friends and family deal, I will next have to decide how to market and whether the investors are accredited or not...but that’s down the road for me.  Thanks for the tip and feedback!

@Scott Krone, @Dan Handford, @Jeff Greenberg thanks for the replies...the light value add is like paint, management replacement, appliances and landscaping. Limited heavy out of state lifting. This is a friends and family deal to get comfortable with the syndication model, provide decent returns then improve on the model. Thoughts and feedback appreciated. 

If not a pure syndication with 10ish investors, what would be a better way to structure the investment package?  The goal is to gain experience with a small win. 

@Herman Herrera thanks for the detailed response!  It doesn’t sound like the inspection was a big part of your costs...I am anticipating that as a bigger portion in MF than in your commercial example. Then again, maybe not. 

Hey BP Community,

I'm trying to figure out how much cash I'll need to raise in order to obtain a commercial loan and be able to close on a light value add property.  He is roughly what I've come up with but would like input from the community.

$1M Property (12-24 units) - will need to meet or partner with someone who meets Net Worth requirement

25% Down

15% Reserves - 6 months of debt service + light rehab

I'm targeting the raise at $400K.  Does that sound too much, too little or about right?

10% liquidity after close  $75K

How much to allocate for the following:

Closing Costs (2%?)

Due Diligence / Inspections

Legal - to create LLP and PPM

What else am I missing?

I can probably achieve or partner with someone who will help with the Net Worth, Credit Score, Cash Reserves and am planning to buy something that will have a Debt Service Coverage Ratio above 1.25%, but I've never bought a commercial property before.  If I meet the other financial requirements will lack of multifamily experience be a deal killer?  Or do I need to knock on the door of smaller local banks?

I'm probably missing a few obvious things so please let me know if this fosters additional questions or discussion.

@Casey Murray thanks for the post!  I think for the time being, I’ll focus on out of state to gain some experience. As the cycle evolves, I’ll look to get back in San Diego. All the best!

@Lee Ripma:  Great post!  You're perspective on OOS investing is really helpful!

@John Leavelle

Thanks for your response...my question was specifically about using all CASH to buy versus 20-30% down, specifically on BRRRR deals. I think I got your answer...all CASH is better for you.

However, your response triggered a couple other questions...

When you use your Private Money Lenders, when and how much do you pay them out?  Is it at REFI and somewhere around 8-10%?  Do they ever want in on the cash flow?

Thanks again!

@Steve Vaughan - thanks for the feedback...I need to do some more homework on the implications of the deed of trust component and effect on seasoning requirement.

@Andrew Syrios, @Lee Ripma, @Steve Vaughan, @Adrian Hollifield, @John Leavelle

Great thread and comments!

What do you guys see as the disadvantages vs. advantages of using BRRRR, purchased with cash (either pooled or saved)?  What am I missing?

Disadvantages:

-hard to save the cash or find the money

-finding the bank to do the refi

-meeting the appraisal amount to match or exceed your cash in

-opportunity cost of having the money tied up

Advantages:

Easier to win deals (taken more seriously by deal finders)

Lower holding costs