All Forum Posts by: Yaya Y.

@Greg Dickerson

Thanks. So essentially what I wrote is correct? GP contributes 10% of the equity on the purchase price then 10% once construction commences?

I’m specifically talking about how the constructions costs get paid out to the lender. Thanks.

On a ground up development deal - are construction costs split pro rata between the LP and GP?

If LP put in 90% of the equity, do they contribute 90% of the construction costs?

Is it the GPs responsibility to obtain the financing etc.? Thanks

@Sam B.

Hi Sam. Thanks for your input.

You’re right - people view LoopNet as the deals that “everyone” doesn’t want to buy. Do you not think that’s the case if you can get it at a discounted price?

If that’s correct, do you know your market that well to know it’s selling for that cheap relative to cost? Why wouldn’t more investors look at it if it’s a bargain?

Basically, you believe that good deals can show up from time to time on the site? Thanks!

@Greg Dickerson

Thanks so much Greg for the thorough response. That makes sense... it’s really all about the follow up and consistency of doing it.

Do you think loop net deals can be fine? I’ve looked into many LoopNet deals and know people who’ve bought them. If they end up in LoopNet, it doesn’t mean that it isn’t a good deal per se even though many investors have seen the deal correct?

For those of you actively acquiring property, where do you find good deals?

Online? Which website?

Brokers?

Calling owners yourself?

Any breakdown?

How are construction loans’ interest rates typically determined? Which index are they tied to? LIBOR?

What are the typical terms seen today when getting a construction loan and what are the interest rates on them?

Can anyone provide some insight that recently received a CL and what was the process of receiving one?

What are the pros and cons of a seller wanting to lend paper rather than an outright sale?

Why would a buyer want to go with financing from the seller rather than a conventional loan from the bank?

Thanks. Any insight/experiences would appreciated.

Originally posted by @Account Closed:

Originally posted by @Yaya Y.:

so just to get some clarification, in every year, your returns are based of CoC besides in the year you sell when the promote is now the IRR?

 
Based on what other people are saying, if your pref is based on IRR, your investors would essentially have a negative return until you've returned all of their capital (most likely happens at sale or refinance). If you're basing the pref off of CoC, presumably you'd negotiate a split for earnings from the sale. Not sure if "earnings" would be net sales proceeds less initial investment or like net sales proceeds less adjusted basis. Sounds like you could also have a CoC pref for the annual cash flow, but then also have an IRR hurdle rate and promote for the purposes of sale. Seems like this would function similarly to a profit split, but might be more confusing...

Still confused on how you can come up with an IRR calculation annually without a terminal value in regards to a sale.

so just to get some clarification, in every year, your returns are based of CoC besides in the year you sell when the promote is now the IRR?

Hi Chris, You’re correct in the sense that with a 1% CoC, your money is better spent on another investment vehicle. No denying that. The only positives with real estate is that I have an appreciation factor, tax advantages, and building wealth each year. Those reasons alone may be the ultimate factor if I pursue a low CoC deal. And yes, that comes with every real estate deal. I guess long term hold is the best route in this scenario.