All Forum Posts by: Billy Guyette

Thanks for all the comments. I'll be conducting a thorough review of all his cost and what mine are projected to be, including a management fee. He does have an emotional attachment to the property, so hopefully he can look at the numbers in a rational way.

I'm looking at a 40 unit in my area that is currently for sale and owner operated. I understand that the value of in apartment complex is based on the NOI. The owner of the property self manages and doesn't count his time as an operating expense, thus increasing his NOI. When I value the property and negotiate with the owner, is it fair for me to add what I think management would cost? This would increase operating expenses and give me a different cap rate then what the owner is advertising

I apologize for commenting on an old thread, but you guys really seem to know what you're talking about.

 A few days ago I posted a question on the forums regarding equity structure. I'm doing my first deal where the investor is fronting all the money and need some advice. One of the guys presented a possible equity structure with escalating ownership. I really liked it, presented it to my investor and he agreed to it. But now I'm starting to think that I'm offering too much. It's structured as follows:

- Investor secures conventional bank financing, paying 20% down

- I get 20% for sourcing deal, he keeps 80%

- I pay half the mortgage, he pays half the mortgage 

- I start paying back 50% of the 20% downpayment, trying to reach invested cash parity with investor

- Once I pay half of my half of the downpayment, my equity stake goes to 35%. Once I pay 100% of my half of the downpayment, we are 50/50 partners

- The whole time I'm trying to reach parity with investor, I'm paying him 10% preferred interest on his cash invested, then we split remaining profit on our current ownership percentage. 

I will be acting as GC and asset manager, but getting paid those fees separately . 

I'm I being too generous? I feel like paying half the mortgage payment with only 20% equity will really squeeze me. 

Thanks for the comments guys! 

@Aaron Pfeffer I really like the idea at the end of your comment. I think I'll explore that option. 

I'm working with an investor who has a fairly large amount of capitol to invest, and/or access  to it. There are a few deals in my area that I would like to pursue, but don't feel like I should devote my time and resources unless I can own 50%. My investor wants to leverage his money, so on each project he would only put 20% down, financing the rest at around 3%. Could I structure the deal where he paid the 20% and I would pay him my half (10%) of the down payment through cash flow? So I would be paying half of the primary note and a secondary note paid to my investor until we reach parity with the down payment. I would be his "boots on the ground". It would be a passive investment for him. Has anybody done anything like this? Is it fair to both parties? 

Billy 

All the major systems will have to be replaced. HVAC alone will cost  $6,000 a unit. It needs a new roof $7,000, electrical $3,500 a unit, plumbing $3,000 a unit, refinish hardwood floors $3,500 a unit, privacy fence $1,500, landscaping $750.00, interior mud work and painting $5,500 per unit, 4 new doors units and possibly 5to8 new windows maybe $5,000.   The kitchens and baths are total guts, $16,000 for two kitchens and two baths. That all comes out to just under $75000, I added $10,000 to be conservative to get to $85000. 

I wanted to get a bank to finance the rehab. I was hoping they would use the property as 20% down since I have no debt on it. I feel pretty confident that the ARV will be between $110,000 and $125,000. I know the margins are tight but the area is zoned historical and the neighborhood has seen a positive correlation with the redevelopment downtown.

I bought a duplex about a year ago in the downtown area of Montgomery, Alabama for $25,000. The tenets were extremely rough, cannibalizing  anything of value in the property. It was next door to a single family home I owned and wanted to protect my investment so I bought it. It needs $85,000 in rehab and I know I can get $650 a month from each side. I have another duplex down the street valued at $110,000. 

Are the margins too tight here? I'll be flipping the single family next to the duplex shortly, so I'm debating whether I should hold on to the duplex or sell it to another investor

Hey guys, this deal never materialized. Converting the property from an 80 unit hotel to a 35 unit apartment complex proved cost prohibitive. The property is currently still for sale. I still have a working relationship with my investor. The problem is he does not want to touch anything under a certain amount, which proves difficult in Montgomery, Alabama. We'll need to look outside our area I think to invest with him.

@Josh Eitingon I really like the preferred return idea. 

Alabama! best cash flow in the Union!

You could always do the first few with traditional financing. Once those are under your belt you could petition private lenders.