All Forum Posts by: Benton Moss

@Theo Hicks I'd rather have debt I think as well, but again, as you said earlier, it will depend on what their needs at  the time. Thanks for sharing Theo!

@Theo Hicks great advice - would you rather structure it as equity or a debt product? Just curious!

@Jason Hirko I think the best way to go about it will be 1) talk with my attorney and 2) ask family and friends what type of returns and structures (debt vs. equity like returns) they are looking for, just as @Theo Hicks mentioned. Thanks guys!

I also found an interesting post here on BiggerPockets that answered a lot of my questions and had some valuable information for anyone else interested:

https://www.biggerpockets.com/forums/432/topics/454892-raising-capital-from-friends-and-family

@Jason Hirko I see. So even if you promised an X% preferred return and they got it over a 10 year period and then you refinanced their entire investment back + cumulative preferred return, they would still own an equity % of the project? I'm guessing you spell this out in the PPM or investment deck?

@Alina Trigub I was thinking that potentially setting up a 'hard money' operation for family with fixed returns may be easier than offering equity precisely because of your reasons, but that is great advice. 

@Jason Hirko That seems to be the advice I keep hearing from others I have asked offline because of how complicated one fund with a portfolio of assets could be with refinancings, rolling capital into new assets, etc.  How do you typically get your investors their money back? Refinancing in 5-7 years? Also, do you essentially own the property after the refinancing your partners out of the deal? 

@Thomas S. amen to that - which is why I'm asking you guys for all this great (free) advice before I do so haha. 

That is great @Jason Hirko! 

And I want to make sure I handle my affairs with the highest integrity possible - meaning that I'd give them the first look. The best way I thought of setting up incentives was that I would be 'forced' by my docs to co-invest something along the lines of 10-20% of the equity so they knew I was putting my money where my mouth was. What do you think of this?

Also, did you begin by raising money for a 'fund' structure or more of a deal by deal basis? 

I own several SFR right now am looking to continue expanding the portfolio - just want to help my family in the short run, but set it up to be a long term business opportunity for outside investors as well.

Hello BiggerPockets Community!

I wanted to reach out to the community because I am mulling over raising some outside investor money from family and friends to invest on their behalf. I have had several of my family members who have asked me to invest money on their behalf, but I wanted to do it the right way. In general, I want to align my incentives with my family's, avoid situations where I have a deal and could take it down myself instead of passing it to my investors, and have some skin in the game alongside my family. So, I wanted to ask this very broad, general question - how do I structure a fund (or family of funds) that gives me the following:

- a profit split on excess equity and cashflow created

- has a long dated term on the money invested (preferably 10-15 years+)

- allows me to scale without mixing deals/money and allows me to coinvest (to put my money where my mouth is)

- allows for refinancing/rolling funds into new deals/properties

- helps me easily deal with partners who wish to withdraw funds at the end of a designated term

- broad flexibility in property type (SFR, MF, SS, and others)

- easily accommodates raising new investment capital as time passes

I am thinking of some sort of LLC or GP/LP structure (almost private partnership/hedge fund like, except with no asset management fee, just a profit split), but want to figure out those 'unknown unknowns' from folks like you! It would be especially helpful if you could provide examples of how you structured your fund or how funds you are invested in are structured.

Thanks and I look forward to discussing!

Benton

@Tamiel Kenney Thanks so much for the incredible response! Lots of great information here. I appreciate you taking the time to write down your thoughts. I'll definitely look into more information on bridge and HUD loans but this was a great primer.

@Joel Owens Thanks for taking the time! Any of the questions answered are great - all part of the learning process. I extremely interested in learning more about the full deal process as I have experience on the SF residential side but not the CRE side of things.

I see. So you have a due diligence clause in the LOI in order to get access to these documents. Besides the bank statements, what other documents do you typically ask for?

@Charlie McCurry Thanks for responding Charlie! I probably overdid it a bit with the question(s) but perhaps it can spur discussion offline. I am learning as much as I can about the commercial process before taking the plunge myself. I will connect offline - would love to meet you and your partner when I am back in the off season!

Hi BP Community! I would like to start a deal case study thread. If you are willing to share, feel free to include as many or few details as you wish - my main goal here is to learn from more seasoned CRE investors and start a thread for the benefit of the rest of the BP community. If you are willing to share high levels details about a good deal you've done, I would love to hear your thought process and analysis on any or all of the following specifics when looking at deals and closing:

Due diligence:

Financials - what stood out to you immediately? Were the financials trending upward, stagnant, or declining? Was it mismanaged? 

Market analysis and competition - What type of competition for the property type was present in the market? Did this plaly a large part in the decision to buy?

Value add identification - Was there a clear detail that stood out as a potential value-add opportunity?

Negotiations:

How much competition was there for the deal? Did you have to sweeten the deal and get creative?

How did you negotiate the deal? What did you use as leverage in bargaining?

Terms of deal. 

What, if any, was your estimated discount to NAV when you bought the property?

Closing:

How long did the deal take from diligence to negotiations to closing?

Financing structure - Seller financing? Heavy leverage? All cash closing but refinanced later?

Were there any bumps in the road before closing?

Post closing and stabilizing property:

Any need for management or personel changes?

How did you execute on value add plan?

How were you able to increase NOI? Expense reduction or revenue growth?

Thanks everyone - I hope we can share some great stories here!

Benton