All Forum Posts by: Account Closed

Bryan I think your model is great!

I hope that you can find useful aspects to my model to integrate into the big excel spreadsheet you guys have been working on (I have been lurking on those threads).

My main goal for this spreadsheet was to make it easy to see the cashflow tiers and fee payments without having to edit multiple cells. What I really tried to do is to make every single equation link to cells as opposed to real numbers. I guess its more "open source" if you will. This should make it easy to import into any existing model. I like to do is play around with these tier distribution numbers! The most important part of this model is all the "IF" functions, and the > and < (greater than less than) functions to get the tiers to work properly.

I am glad you guys are going to incorporate the GP/LP partnerships and cashflows to this as I think that will really help people understand fund structures on BP. If you need help I would be willing to help out but you guys seem to have it covered. Perhaps you will find my code useful.

When you do build it some major points to hit include:
- at least 4 tiers, NOT including the capital repayment part at the beginning. The 4th tier has been a very important part of our negotiations, especially in higher risk opportunity plays. (In my model you can still do 2 tiers, just change the distribution to 50/50 for all remaining tiers after the threshold you set).
- Charging of management fees, not just the property management fees (or other fees), but I mean Fund Management fees (for assets under management). I don't charge one, but others may.
- Calculation of investor IRR including any placement fees (referrals). Placement fees of 1-2% for any capital brought in by a broker dealer or other agent.

Of course maybe these things are not appropriate for the small apartments spreadsheet, but its just what comes to mind now. Thanks very much for the feed back! Cheers, V

Almost all of us talk here in terms of hundreds of thousands or perhaps a few million. What about those who are super rich? It can't be about the money - can it?

My old boss was a very tenacious business man, but he was also already very rich. Before he started his own fund, (I heard from my co workers) that he got paid $50mm+ a year working for Deutsche Bank in structure finance (for at least for a few years). I don't know what his net worth is, but when I left his fund, we had just under 1 billion AUM, and we charged 2 and 20, which means on just the 2% management fee alone the fund was making $20mm a year.

He had a penthouses in Chicago, New York and London, a Princess 85 yacht, a wife, at least 1 mistress... this guy had it all. However he was always in a bad mood, continuously dissatisfied in his place in life. He was always in his office door closed, sometimes for days, and he'd randomly come out to fire a trader, and talk about some lofty goal of merging with a bigger fund and fire the rest of us - in other words he was looking for more ways to cash out.

If you had 200mm, you would think that is enough for anyone, but I think with a lot of these people, its a game, a mentality of not just how much money they can make, but a competitiveness that makes the it more about the pursuit than about the money. I think a lot of it is about ego, about winning, and about recognition.

A few days ago, I downloaded the "Simple Waterfall Model - Private Equity" spreadsheet in the files vault section, that was created by Bryan Hancock. First wanted to say thanks it s a great spreadsheet.

I wanted to contribute to the board with an additional spreadsheet waterfall distribution for private equity. It is not as detailed as Bryan's, as in my model I did not provide total expenses in a term sheet format, nor did I take financing into account (no equity accrual, debt payoff, etc - cash only deal). It does not take into consideration of rental cashflows, but only revenues generated from the sale. (Tried to keep it simple here).

Multi-tiered waterfall models are useful to provide protection to the investor, while incentivises (sp?) upside for the Fund or promoter. In this structure, most of the payment to the Investor comes on the front end, and returns to the Fund or Promoter come on the back end. These are great structures if a client is happy with a particular return, but gives you the opportunity to make money by delivering higher returns.

This spreadsheet is just 1 sheet, part of a long complex Excel model, I just extracted the 1 sheet for Bigger Pockets site to ease the complexity.

What is different about this spreadsheet is that it provides up to 4 tiers of distribution, as opposed to having just a Preferred Return (after Capital return), and then a split (in Bryan's model its 50/50).

I made it easy to edit your own numbers, there are only a few boxes to complete. It should also be easy for you to reverse engineer the calculations in Excel to build it into your own property models.

How to use it:
- ONLY EDIT THE YELLOW.

First edit the original Investor Principal amount.

Next, edit the Net Cashflow, which is the total return the property generated, after repayment of the Principal.

Finally, edit your water fall structure.

Currently this is how its set up:
1st Tier - Preferred Return of 8% (Investors get 100% of the first 8%)

2nd Tier - Next 8-25% is divided 70-30 between the Investor and the Fund

3rd Tier - 25%-50% is divided 60-40 between the investor and the Fund.

4th Tier - 50%+ is divided 50-50 between the Investor of the Fund.

Change these percentages in the yellow boxes and see the actual fee calculations change.

I welcome all questions, comments, viscous accusations and any other form of communication about this topic!
:cool: Also, I hope that it is useful for people on this board, as we all try our best to raise money for our projects.

Thank you all for your thoughts and consideration.

Find the spreadsheet here (I also linked it here):
Multi Tier Waterfall Model for Private Equity

I learned the hard way that spears on the top of steel fences are not for show. They will cut into your hands. :oP

I also learned that sometimes there is nothing you can do to stop water from getting into the house. This year the torrential rains and flooding have humbled me. Granted its not like a house was under water, but it was like flooding in a basement of a building that is over 120 years old. The basement has been finished for over 15 years and it flooded this year for the first time. wtf!? Its amazing that water something we love and use daily can be so unpredictable. And what an expensive fix!

You should explain that you are doing everything you can to ensure your collective future, to survive in these uncertain times. There is a good potential for success if you play the real estate game well, and that this success makes life easier for the two of you in the future!

You could schedule a holiday together as a reward for both of you after you achieve a benchmark? Maybe that will be a nice gesture?

My girlfriend understands my ambition and even though she does complain when I work late everyday, she knows there's nothing that will stop me from achieving my goals. At the end of the day, I am working for our future.

My mother said that women expect their men to be successful, but they also expect them to be home and are not happy when they are at work.

A lot of people go for the newest foreclosures that hit the listings. I like the ones that have been sitting on there for like 300 days. Those have a lot of room for negotiation. :)

Thanks for posting the pictures. The first time I saw something like that I got really freaked out!!! It was just so scary, on that day I was alone in the pitch black dark with just a flashlight, in the basement of a vacant urine smelling home in the hood). I had just watched 28 Days Later for the first time. Scenes of blood splatter was fresh in my mind. A murder scene was my gut reaction. I got the f* out of there. I have seen it more recently and in the broad day light its not so scary but it just feels so seedy. I have been in some seedy places but the manufacture of drugs is just so horrible.

Great luck to you it is terrible this happened to one of your properties. What I think you should do is call the police. After you give the 5-0 the info, just let the police do what they do. They will snoop around. At least they will have a new lead. Maybe the guy did provide all fake info, well its up to the Police to determine that.

We need to get these guys off the streets.

Truly sad! Religious fundamentalism has really taken its toll in human history. Sadly it appears extremism continues to grow in all directions.

China its crazy and amazing over there. What you see is a raging bull market among an authoritarian government which has huge interest in maintaining social order and stability. The irony exists when the authoritarian government claims itself to be Communist but sets annual GDP growth targets in the double digits.

Just to be clear the so called Communist Party of China are not communists! They are capitalists! They call themselves Communist because it is the way they can legitimize their rule - through historical legacy of the actual communist revolution where the poor farmers were in fact elevated in the social hierarchy. The only other way they legitimize their rule is through growth, that is through economic performance. The Communist Party will only maintain power if growth continues. Once there is a recession in China as we have seen here in the US, then I do believe there is real trouble. For that reason, betting against China is betting against Beijing's ability to maintain control.

There are problems in its real estate. Property value appreciation is so immense 30% a year - apparently it might come down this year a bit).

What you have now is a PBoC that has been ordered to have a loose but 'appropriately tight' monetary policy which has fueled inflation. Not to mention the artificially weak currency.

The real estate boom is the price paid and they the central governemnt have installed many reforms to try to counter real estate appreciation.

For example, Beijing has issued a decree stating that the minimum down payment requirement for the purchase of a second home will be raised to 60 percent of a property's value, from the previously 50 percent.

They are targeting the stay at home moms have made huge amounts of money flipping condominiums in their spare time. Its actually true that I know many stay at home moms in China have have become very adept at flipping properties (and online forex trading). We are talking about $500-1000+ US dollars per square foot minimum per apartment unit in Shanghai, Beijing, Hong Kong and other major cities. These are properties that only get at most 4 cap incomes. The Chinese word for flip is chao ç‚’ which means to fry. Chao lou is to fry apartments. Real estate you could say is a pasttime for the Chinese. Hong Kong is even more expensive because it has become a tax haven for the chinese in a new type of account called the offshore RMB. There is lots of Chinese inflation going to Hong Kong (Think Chinese buying real estate in Hong Kong), plus the direct peg the HK dollar has with the US dollar means that HK has the exact same inflation and monetary policy as the United States.

The problem with the current market is that you are betting against the Chinese government. These guys will suppress a movement so quickly it barely gets known about. All the interrogation techniques we used in Guantanamo Bay were devised by the Chinese secret police when interrogating/torturing the Falun Gong!

On the other hand there are more and more signs of dissent. There are hundreds of thousands of small protests against the government every year that are often labor disputes that do not receive just treatment. Labor unions are virtually nonexistent in China (so much for being Communist!).

I think in China a lot of people are completely priced out of the market. Many first time home buyers are completely unable to participate as the rich get richer and the poor get poorer. If you can get to the point where you can own that property then you may be unable to get a second one.

The government has had a huge effect in trying to clamp down on leverage and that is having an effect in the real estate market, though many see this as a buying opportunity rather than the beginning of a longterm down trend. The Chinese govt KNOW there is a huge problem and imbalance in their economy but require continued growth to maintain their power. They are actively trying to maintain low inflation, while stimulating growth, while mantaining home values.... But the Communists in Beijing are highly capable so you see the dilemma in betting against them.

My friend and I were thinking about how we would directly short China real estate, which is not recommended because you are literally jumping on top a a grenade. But the thought has crossed my mind...... There are some ETFs out there, Copper used to correlate well but not so much after QE2. Just a few thoughts.

Come on Bulls!

I've been caught mid procrastination by my coworker watching this on repeat:
http://www.youtube.com/watch?v=GOtxJrzp6ls