I Think I Found A Deal. Now What?

Question

Hi All,

Hope you're enjoying MDW!

I have a "layup" question that I'm actually struggling with. I think I found a good deal but not sure where to go from here. I've analyzed it in greater detail and the numbers look great, and I put in a soft offer to see if the seller would entertain negotiations. I have a PM, CPA, and attorney on hand, but still need to syndicate the money. Do I set up the LLC first? I'm hesitant to send a formal LOI  and put the property under contract in my personal name & without having the funds ready. Where do I go from here?

Thanks in advance!

Alina Trigub · Answer

@Snehann Kapnadak I agree with @Andrew Johnson depending on the deal size, location, underwriting, you may or may not need a syndication and can use other options to buy (if it makes sense of course).  So if you share additional details, we'll be more than happy to help you out.

Best!

Robert Borr · Answer

@Snehann Kapnadak talk to your attorney before you start raising funds and soliciting the deal. Know the rules for the exemption you intend to use for your syndication - without a game plan, you may inadvertently disqualify certain investors from the offering.

Hadar Orkibi · Answer

The best option is to raise the money first or atlist have few potential investors lined up. but im sure if the deal is realy good you could make some money out of it.

Put an LOI with your own name  and/or assignee. without knowing what you can buy it for you have no deal on hand...

Can you sahre the numbers and the upside?

Where is it located?

Snehann Kapnadak · Answer

Thanks for all the responses, I really appreciate it!

@Hadar Orkibi Got it, so I can put the LOI in my name and then assign it to my LLC (when it's created later)? Sure, rough numbers are ~300K asking, I value it at ~250K, about an 8 cap, 9% CoC, located in the KCMO market.

@Robert Borr Noted about talking to my attorney first, thanks! Especially because most of my investors would be family and friends and non-accredited.

@Percy N. It's an 8 unit property. It would be my first one, hence why it's small. So by your estimates, I'd probably need about 5-7K just in EMD and additional out of pocket expenses. I'm finding a hard time building that credibility with brokers but hoping to start with smaller units like this one to build that up.

@Andrew Johnson and @Alina Trigub Good to know, thanks a lot. Since it's about 250K-300K, and since I don't have that kind of cash myself, I was essentially going to partner with fam & friends and we'd raise enough for the down payment (if I can find a lender who's willing to loan that low) and split the returns.

Account Closed Definitely agree with having a list of investors including those who've committed to the deal + backups who are willing to step in in case others pull out. Thanks!

Hadar Orkibi · Answer

sure thing Man, I personally don't syndicate at this stage.

But would consider some type partnerships maybe later on.

Would be an interesting processes as some of my NZ friends already keen to partner, but im not ready to accept yet....

Dan Handford · Answer

I figured this is what you meant, but just wanted to make things clear for everyone. Thanks for explaining.

Hadar Orkibi · Answer

My point @Dan Handford was the atlist have few potential investors lined up.

It depends on your business model, often with a found that works with close group of investors/ friends/ family there is some sort of commitment upfront.

I have seen it happen few times. When syndicating is different story.

Dan Handford · Answer

@Snehann Kapnadak

@Hadar Orkibi I disagree with actually raising the money first. The best option is to have your investor list ready for when you have a deal to take down. You can have an estimate of the amount of money any given investor may invest but I wouldn't take money from any investors until you have a deal.

@Robert Borr I definitely agree that you must talk to your SEC attorney first to make sure you know the type of syndication you will be offering so you know how to proceed with investors.

@Percy N. Great points! Don't forget the money aspect of the deal. These deals after PSA is signed is when most of the work starts and that work costs lots of money.

@Andrew Johnson Deal size is definitely a deciding factor on how to move forward.

I Think I Found A Deal. Now What?

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