All Forum Posts by: Paul Shannon

@Paul Azad, the relationship between Monday and RSN was described as a joint venture, meaning both groups would be responsible, and actively involved, in asset management and decision making.  The pref layer is a third party institutional player.  

The operating agreement should further expound upon the relationship details between Monday and RSN.  If I were considering investing, I would read the PPM and Op Agreement to ID risks and further questions for the sponsors. 

@Alex Bekeza thanks for the response.  Love #3.  I don't think I could let that cash waste away.  

Yeah, the non-recourse potential is what's making me think of paying the higher transaction costs and doing a cash out refi.  

Plus then if there's another opportunity outside of real estate, cash will be accessible.  

Hey all, thanks ahead of time for advice. I have an apartment I'm repositioning currently. I purchased it for $1,045,000, cap ex is $170,000. ARV appraisal was done pre-closing @$1,350,000, which would put the in-place loan at about 63% LTV. Recourse debt and no partners.

Once stabilized, I was considering a few options: 

1. Refinance. I should be able to get out about $180,000 @ 75% LTV. Cash out would be use to acquire another asset. No idea when that may come along. There would be fees associated with this obviously, which is a downside, but cash is handy.

2.  Cross-Collaterize.  In this case, if I find a property, I can leverage the other stabilized asset and use the equity in it towards a down-payment, etc.  Has anyone done this?  What are the pros vs. cons?  If its recourse anyways.  If I default, the bank is coming for all my assets anyways, so I don't see any additional risk outside of what I'm already taking.

One con I see is not having the capital liquid and finding better terms with another bank or using/qualifying for agency debt on a future deal.   

3. Keep the LTV at 63%. Better Cash flow. Still have access to short-term capital to put down on an opportunity. Then could refi later out of my existing property. Rate change might be a risk here. Could also look at sponsoring a deal and syndicating to get it done versus using so much of my own capital.

Nice to have some options, but looking for guidance specifically on cross-collateralization and risks, as well as what you would do.  

You should look at REITs for historical returns related to real estate, the public market.  The private market is fragmented.  Syndication was not a big thing until the Tax Cut and JOBs Act in 2012.  Syndication was around, but it was exclusive to very very high net worth folks.  With the opening up of SEC regs, crowdfunding became popular in through the JOBS Act, and things opened up.  We've been in an UP market since.  So the syndications model as it is today, really hasn't been through a full economic cycle.  

that’s a slippery slope.  College tuition is out of whack. But should mortgages be forgiven in 5 years because people bought houses when prices were out of whack.  I don’t think so.  Free will.  If we start forgiving and giving handouts the whole system is at risk. 

Midwest tertiary markets in C-class product meet you budget and goals. Gotta find good property management or it can turn into a nightmare if you're out of state.  Some good recommendations already.  Think of towns like Toledo, Dayton, Ft. Wayne, Kalamazoo, etc.  Its not easy.  Get familiar with the market and get very familiar and comfortable with the property managers....plan A, B, and C. 

Very broad question, but you mentioned syndication or going at it alone, so addressing that....simply put, if you can hang on to your equity in a good deal, do it. When you JV, you start to split equity. When you syndicate as a general partner, you start charging some fees, but you give up the majority of the equity. There are pros and cons, but the more investors, the more diluted your position. That can be good for diversification and risk mitigation, but bad for returns.

Syndicating allows you to scale and take down deals you would never be able to due to capital constraints in your personal funds.  

JV is a happy medium. Maybe you have 25% equity between 4 partners, can gain some scale, tax benefits, forced appreciation, etc, of multifamily, but could take down a 20-unit or so that you couldn't alone.

If you can buy an apartment buy yourself and its a good deal, you have total control, 100% upside, etc.  With that of course comes concentrated risk, to be fair in assessing the downside. 

It depends on the deal, your risk tolerance, and your goals.

I was just typing you a Linkedin message as you were responding on BP!  Lol.  Check you inbox.  

As an active investor who also invests passively, I like to find someone who's invested with the sponsor already and ask them about their experience.  Making sure they follow-through with what they say they will - do they pay distributions on time, K-1s in a timely manner, good communication, what type of deals have they done, have they taken any deals full cycle, have they been through economic cycles, are they investing in their own deals, what was their background before real estate (did they manage a P&L), do their fees align with the performance of the asset, background check, etc.  Let's face it, passive investing in syndications has unique risks for the LP.

The sponsor is the most important factor.  Closely followed by the deal.  The deal has to align with my modeling, but even a good deal can be blown up by a bad sponsor.  

I don't know about an RE Investing degree per say, but just basic personal financial education should be taught.  Probably even earlier than college.  Would we have fewer problems in this country if kids learned about credit card debt, mortgage amortization, pros and cons of leverage, compound interest, etc?  I think so.