All Forum Posts by: Percy N.

@Carter Nelson congratz on the 100 units! There are also services and data feeds you can pay for like CoStar, that will give you that information along with basic info on the asset. 

I say it depends on whether you want to manage these and have an active role yourself or whether you are looking for a passive investment.

If you want a passive investment, then you can look into investing via a syndication or a fund that will enable you to get the economies of scale and the location is less critical provided the sponsor has experience in that area and has a good team in place at the location. 

@Juan Carlos does the @10.5% (APR?) ROI include the sale of the property? Something seems off or the projected returns seem pretty low, especially for STR that tends to have much higher cashflow.

Not legal or tax advice but there are a number of ways in which this could be structured depending on your investor's risk/reward desire and your risk/financial strength.

The main ones being doing a LP/GP structure where you get a promote and structure the promote/carry to be treated as long term capital gains or offer your investors a private note in which case you get to write off the interest they charge you as expenses and if you are still getting a promote at the back end, that would be long term capital gains.

Don't forget to flush out how the depreciation and any depreciation recapture upon the sale would be treated.

The amount you are seeking to raise is not high and if you already have existing investors, ask them what their preference is and structure the docs accordingly. Keep in mind that the legal work will cost you around $10k-$15k but should be done if you intend to bring in passive investors.

Chris, for an 8-unit property I would approach a local bank or credit union first.

Most of the lenders and contractors we have worked with typically do 100+ units.

If this is a 1978 property, what is the deferred maintenance repairs required? I am sure their pro-forma does not cover that in detail. Ask for a list of what Capex has been spent in the past 10 years. How old is the roof, HVAC, Appliances, etc, etc. Ask for the maintenance request logs, and speak to the tenants.

@David Rosen my first suggestion would be to list out what you like about (or hope to get by) investing in multifamily directly. Then confirm those assumptions with an experienced investor.

Multifamily is about the benefits of scalability. When I transitioned from Single-family to Multifamily investing 10+ years ago, I was initially looking to purchase a 50-60 unit complex by myself but quickly realized that you need around 100 units to make the numbers really work and have dedicated staff, otherwise the property will not run as efficiently and will require more attention and your time. It is also very difficult to get good deals as a first-time buyer.

Thus, many smaller investors end up investing in syndications or funds that invest in larger 100-300 unit deals with experienced investors. Not sure of what your investment amount is, but unless you have $10-$15mm of equity to put into an investment directly, you may also want to look into the syndication model or co-gp an opportunity.

@Maria T. as others have said, preferred equity has a place and can be good or bad depending on how your structure your capital stack and your investment/investor's objectives. 

With the lower LTVs offered by senior lenders these days, it may be tempting to look at preferred equity and it may make sense since technically it is cheaper than LP equity, but also keep in mind they have a higher liquidation preference (obviously) but will often want all the cashflow (or a majority of it) to come to them before the LP investors and will also want large reserves, so make sure you model out the cashflows and understand the end-to-end deal with the preferred equity investors.

We have some institutional investors with whom we did a combination of a pref and JV deal and it worked quite well for everyone including them and the LP investors. It all comes down to how you can structure the capital and the overall cost for it.

@Jim Pfeifer, I had a call with the Vyzer folks from a sponsor and LP perspective and it seems like a good tool for the "professional investor" or anyone who wants to closely track their investments. 

It does take some work to keep it current and I am not sure if more than 5-10% of the typical HNW investor would keep up with it to justify the cost, but I was planning to try it myself and then mention it to our investor base as a tool they can look into (no profit sharing or conflicts here).

Also look at UpWork for independent consulting work.