All Forum Posts by: Nicholas LaGatta

Following this.  I'm navigating the same waters now.

For my target property, $50k will cover part of the $65-70k purchase price, but I would have to come out of pocket another $10-15k for repairs, for an ARVe of $105k, then split the equity.  

How much did it cost to set up the LLC and partnership agreement? How much time did it take to set up?

With your partner being 100% compensated in equity with no cash flow, would the closing attorney just pay out the partners based on their partnership agreement or do they pay the LLC and the LLC disburses according to their operating agreement? I assume the accounting is much easier if one party provides all the financing. I mostly want to avoid complicated deal structures and having to have a CPA oversee everything and manage disbursements and things like that.

Hi all,

Having built a successful real estate investing business with my own funds, I'm working on pivoting over to investing other people's money.  I have been on the lending side before and I just did my first debt deal as a borrower.  

I have a higher net-worth individual that believes in what I'm doing that wants to invest, starting with $50,000.  They've got plenty more to invest, but want to start slow and see how the performance is.  Due to the small amount, I offered them a debt-deal with an interest only loan.  However, they came back and said it was really important for them to have an equity stake.  

Based on the deal structures I'm familiar with, moving to an equity partnership is going to require an LLC and partnership agreement, a CPA to oversee the finances and disbursements, additional reporting, and additional communications and stakeholder management on my part. I really don't see it being worth it for such a small amount of funds (considering I am not strapped for cash).

I really want to work with this investor and I see the long term value, but my time is extremely valuable and I don't want to get bogged down in a bunch of paperwork and logistical headache for such a small amount of money.  

What do you guys think?  Is there some easy low-touch way to cut them in on the equity without creating a logistical nightmare?  Is there something I'm missing?  

Thanks!

I'm a newer agent and I speak Spanish decently.  I've considered using my Spanish skills to cater to the Spanish-speaking market niche, particularly investors, renovators, or even retail buyers/sellers.  
Does anyone here have experience with this? Any tips on lead generation or where to find these types of folks? Is there a Spanish-speaking REIA?

@Chad Carrodus. Any thoughts on how an influx of foreign money would impact our local market? Would it be net positive?

@Marc Brenner agree with this. Capital View and Sylvan Hills are still undervalued, IMHO. Pittsburgh is overpriced, although relatively cheap, but your investment will pay off inevitably.

Go for a walk in Pittsburgh and then tell me if you want to live there. There are awesome streets with great people, but also plenty of trap houses and garbage fires.

Personally, I'm a big fan of Pittsburgh and the surrounding areas culturally/architecturally/geographically, but know what your getting into. You're paying a premium for huge growth potential, but you're going to need to put up with a lot meanwhile.

@courtney 

1.  Perhaps a little ATL-centric of me, but by rural Georgia I mean more second and third tier cities.  Anywhere I get the right deal and opportunity would be in scope.

2.  I would prefer to use the fund for the downpayment and leverage the rest.  I can get more equity growth, interest write offs, and invest in more properties to diversify.

3.  Yes, I am in (what I consider to be) a very high tax bracket.  

I appreciate the invite, but right now I'm traveling to New York Mondays to Thursdays, which legitimately makes networking complicated.  I'm still open to connecting with other investors on the weekends.

Thanks for the comments, Justin.  

#3, My RE business in its current state (9 units) urgently needs an CPA/bookkeeper, so fund management experience should be a criteria in our search.  My current property manager is in my brokerage, but he would probably only come into the deal if the property was near Atlanta.  A deal in Georgia would also be nice, so I can pick up a commission.  Any idea how much a CPA and attorney would cost to set up the deal?

#4, I need to communicate the deal to the investors, so they understand it and feel comfortable investing, know what they're signing up for, and know the assumed returns.  

I'm leaning towards a $1-1.5M deal that I could access with just 2 or 3 partners.  If I could get something somewhat near Atlanta, the entire deal becomes simpler, since I can be the agent on the deal and use my current property manager and contractor.  

Although, I talked to an apartment buyer this week that strongly recommended against buying an apartment in Atlanta, since there's too much competition and it's hard to get good enough returns.  In fact, when I look at Chattanooga, Macon, Covington, Augusta, etc., the cap rates are much stronger, but I doubt the appreciation will be as strong and I know the deal would become way more complex, since I can't be on-site as often or leverage my existing GC, PM, closing attorney, etc.  

I'm a moderately experienced moonlight investor with solid and relevant non-RE professional credentials, just got my real estate licence, joined my PM's brokerage, and I just had 3 deals pay out.  I'm working on leveling up in real estate with goal of going full time in the next 1-2 years. 

I've started discussing with a few investors about setting up an equity partnership to buy small apartments, most likely in rural GA or surrounding states.  I've been deep in the weeds with research to put together the nuts and bolts of this.  Before I go too deep, BP is always a great place for a sense-check.  

Below is a list of target property criteria (broad for now, but I'll dial this in) as well as a list of open questions that I'd love your feedback on.

Target Properties: 

-$1-4M purchase price
-6+ unit multifamily apartments in GA and surrounding states
-Value add opportunity through capital improvements, increasing occupancy, and/or raising rents
-Property class B or C, no war-zone areas
-Near stable employment, education, transportation, entertainment/amenities, and future development

Open Questions:

1.Is it realistic for me to be able to set up and operate this type of fund part time?

2.If it’s not realistic, I’m considering taking my capital and investors and bringing them into someone else’s deal as LPs to learn the ropes and gain some experience and credibility. I’m only home 3 days per week, so assume REIAs are not realistic for me. What are some other ways to get connected to people already doing these types of deals?

3.If this is realistic, what is the correct order of operations to get this set up? Do I start with an attorney, CPA, consultant, other? Are there companies that specialize in setting up and managing these funds, soup to nuts? How do I find the right professionals with the right experience?

4.My investors will mostly be non-accredited but with basic financial sophistication. What’s the best way to communicate the deal in straightforward terms? I haven’t found too many offering memorandums that clearly do this, so I’ve started building my own from scratch.

5.What else might I be missing here? Any other advice or words of wisdom would be welcome.

Hi, Bryant. I've gone deep down this rabbit hole before. It's great if you happen to own the right property, if there is the right opportunity, or if you for some unfathomable reason want to do STR. Although, I don't see it as a viable primary strategy. You will get better return on capital by buying an actual duplex or 2 lower end SFRs, unless you are talking about doing this in a high value area, but I assume you favor cash flow over equity (pretty sure you do based on interest in this).

I made two "feuxplexes" I operated as STRs and did great, but I wouldn't do it again.  I have two duplexes that outperform them financially and from the standpoint of my initial time invested.  I also ALMOST bought two ambiguously legal triplexes and I'm glad I didn't.

Happy to discuss my experience further if you want to reach out directly.