All Forum Posts by: Nicholas Sheridan, Jr.

Hey @Caleb Goettl that is a good question and I think involves a bunch of factors. What is your goal with the property? By purchasing a property that is already at the max of its ARV (aka they did the dirty work and added value) then you wont be maximizing your equity. Also you make a note that it is an expensive market - well if you buy a property that is already fixed up then it will be just as expensive if not more than the others.

So I just ran into an interesting situation with my duplex property. My partner and I want to do some renovations to get it up to market rent. The equity %s are my partner has 25% and I retain 75%. Lets say that the renovations cost $4k, how much money are each of us responsible for? Is it 50% each or would it revert back to our equity percentages? Under the additional funds section in our LLC operating agreement it only mentions that the money can be borrowed from either LLC member or an outside source. When I run the numbers I believe it makes sense to use the equity percentages since the cash on cash return (based on the rent increase) is the same. See below picture for the run down:

After a triplex property fell through 2 months ago due to a low appraisal and zoning issues I quickly found this awesome off market deal. Here are the dirty details:

• Purchase price: $145,000 (seller paid $2,200 in closing costs)
• 25% down (had to pay $3k in agent commissions)
• I partnered up for this deal and we both put in 50% of the initial capital. My partner now owns 25% equity and earns a 5% preferred return amortized over 20 years.
• 3.125% int rate
• 2/1 per side plus each has a separate garage.
• Property taxes $0 (24 year tax abatement - 9 years no taxes and then 50% for the following 15 years)
• Insurance $1,071
• Property management 10%
• Rent $725-750 is market (Currently at $450 since the tenants rents have only been raised once SINCE 1996 !!! working on getting this bumped up)
• Vacancy rate 6% (very conservative)
• Maintenance and repairs 6%
• Oh **** fund 5%

Cash flow $260/month per side

Notes: An identical duplex next door (in worse condition cap ex wise) just went under contract last week for $170k. Also, my goal is to reach 100 rental doors by 2025 - so far I won 1 SFH and then a 75% stake in this duplex so 75% of 2 doors is 1.5 doors and 1 + 1.5 = 2.5 doors.

After a triplex property fell through 2 months ago due to a low appraisal and zoning issues I quickly found this awesome off market deal. Here are the dirty details:

• Purchase price: $145,000 (seller paid $2,200 in closing costs)
• 25% down (had to pay $3k in agent commissions)
• I partnered up for this deal and we both put in 50% of the initial capital. My partner now owns 25% equity and earns a 5% preferred return amortized over 20 years. 
• 3.125% int rate 
• 2/1 per side plus each has a separate garage. 
• Property taxes $0 (24 year tax abatement - 9 years no taxes and then 50% for the following 15 years)
  
• Insurance $1,071
• Property management 10%
• Rent $725-750 is market (Currently at $450 since the tenants rents have only been raised once SINCE 1996 !!! working on getting this bumped up)
• Vacancy rate 6% (very conservative)
• Maintenance and repairs 6%
• Oh **** fund 5%

Cash flow $260/month per side 

Notes: An identical duplex next door (in worse condition cap ex wise) just went under contract last week for $170k. Also, my goal is to reach 100 rental doors by 2025 - so far I won 1 SFH and then a 75% stake in this duplex so 75% of 2 doors is 1.5 doors and 1 + 1.5 = 2.5 doors.

I am in a position where I have a silent investor (I am doing all of the work) who wants to get involved on the next deal and will be providing all of the capital needed for closing and the down payment. I am planning on structuring the deal as follows:

• Investor puts in all of the funds needed for the down payment and closing costs
• Each month the investor receives a preferred return rate of 5% of the profits. This monthly preferred return payment continues until the investor's initial cash contribution (down payment and closing costs) are repaid in full.
• The remaining monthly profits are split 50/50 between the investor and myself.
• If we sell the property (for a gain) the mortgage gets paid back first, then the investor gets their initial contribution back, then the remaining profit gets split 50/50.

Do you think my structure is reasonable? Do you think the process when we sell is fair or favors one side too much? How are you structuring your partnerships?

@Guifre Mora Thank you, looks like the smart thing to do is reach out to an attorney

I am running into a financing issue that I can't find the answer to anywhere I search. I am looking at financing options for the next property and what I wanted to do is setup an LLC, have investors (friends and family) put money into the LLC and then I would use that money as the downpayment. I would pay the investors back with a fixed rate loan and I would retain 100% ownership of the LLC. HOWEVER, I just found out that this is most likely illegal especially if the investors are non-accredited. Damn! Now I am wondering if the investors could be managers in the LLC, have 0% equity and loan the LLC money?

@Kealii R Manner Thank you! @Bruce Hill Oh absolutely, you never know how expensive something is until it breaks.

@Sam K. Thanks!

@Basil Toyloy It seems to be very very common these days, nope