All Forum Posts by: Vince Biegel

I am not going to get into the HCVP program. There are certainly pros and cons but I feel this has been discussed at length in these forums. Here’s my thoughts:

Structure is more than just ownership percentages. You mention there is a 70/30 split but also mention the operator partner will be responsible for management and construction. What type of fees are charged? Is there an acquisition fee? What are the construction and maintenance fees? Is there a management fee? Is there a disposition fee? You have to look at the entire picture, not just the ownership percentages because fees can eat into any margin that may exist.

This segways into my next point which is to be weary of these low and moderate income single family syndications and JV opportunities. It's a great narrative and a lot of money has been raised to advance this investment thesis. Nobody is going to question the need for more low and moderate income housing but I've reviewed a number of these single family portfolio opportunities and I find them to be nothing more than an opportunity for the sponsor or operator to collect robust fees without a viable exit strategy for the equity partners.

Here is a quick summary of how these opportunities tend to play out for the equity partner: The equity partners money is invested in homes in low barrier of entry markets which means high transaction volume (plenty of opportunities to collect the same fees I pointed out in my first point). Once “stabilized” these homes are often propped up on appraisals that rarely match reality. Single family portfolios, particularly in these markets are generally very inefficient and the cash flow is eaten up by management and maintenance fees. The equity partners see the equity in the appraisal reports and believe this will be their ultimate exit but fail to appreciate there’s limited opportunities to actually sell these homes to owner occupants given the locations where these homes were purchased and in the rare instances where it happens, the buyers are reliant on 5-6% seller assist and turn over costly inspection repair lists. These transaction costs kill the margins and you realize the death by a thousand paper cut disposition approach isn’t worth the effort and ultimately sell as a package to another investor discounted and you never see the equity translate to an actual gain. Meanwhile the sponsor/ operator has already collected their fees.

Of course there are instances where the underlying thesis is to purchase in locations which transition away from being a low/moderate income neighborhood but that’s not what I typically see. If you are going to buy into this investment thesis, do it on your own and hire a 3rd party GC and property management company.

If you are going to participate in a syndication or enter a JV as the equity, partner with a someone with a skillset that can bring to the table unique deal flow that you are unable to source on your own. Low and moderate income single family homes leased to HCVP voucher recipients doesn't check that box.

@Vince Biegel you've got more capital and fame than the average investor here on BP, but all the same challenges.

Do NOT buy into the HYPE of S8 properties!

Have you signed up for Tom Brady's nutrition & exercises TB12 program? Why not?
He's the best football player ever, so it MUST be worth the hype!

Get the point?

Understand your hope of investing in something like this. It's probably no different than what Jordan, Magic, Shaq, etc. did to get started.

IF you pursue something like this, you should try 1-3 properties to start and micro-manage the he** out of EVERYTHING! You should understand everything about the PROCESSES, not all the details - the only exception being the Profit & Loss numbers. Those you need to understand 100% and are what you'll NEVER stop micro-managing.

Why? 
Because even if you can trust your partner 100%, we're all human and can make mistakes - sometimes fatal ones. There's also the issue of risk - someone with only 30% at stake, may gamble a LOT more than you would gamble with your 70%.

Also, strategize and think through worse-case scenarios for fraud. Look what happened to the Jaguars and how they got scammed for $22 million by an employee! What systems can YOU put in place to avoid something similar?

If you decide to do this on your own, you may want to consider your own "backyards" - either Wisconsin, where you grew up, or Baltimore where you reside now(?). Then you be more hands on and learn faster and also verify more easily using your personal relationships. You could also leverage your fame in those areas to get exposure to more deals & before others AND get even more PR to help your business by promoting a "giving back to the community" angle.

Hope this all helps!

Depending on the market here in Florida, MF may not provide you with the greatest return. As an investor and Broker, I recommend buying an opportunity - rather than a property type and choosing a market that provides both year-over-year property appreciation and rent price increase. Real estate investing is often misunderstood as something less than what it really is - creating, building, and managing a business to maximum return.  Congrats on having the insight to start a second (or more) business segment while you're in the prime of your career. 

Best...

Having money when starting in this game can be a blessing or a curse depending on how you go about it.  I strongly suggest learning your market and learning to market and pretend you don't have any money.  If you make it on 10-20k, you will know exactly where to put your money once you have done 100+ deals or so.  Until then, it is likely risky to deploy a bunch of funds.