All Forum Posts by: Billy Guyette

Bryan, thanks for such a thorough response. I'm very new to this, I appreciate the frankness. 

The investor I'm dealing with is new to the real estate asset class. He would be relying on my expertise in the repositioning process, as we've successfully done a handful in this market. Though we've yet to sit down and go over a framework of how he wants to invest and structure the partnership, he's implied that he wants to leverage the money he's allocated for real estate investments. He wants the investments to be 100% passive, making him a true limited partner. 

I would find the deal, execute the repositioning process and manage the property(s) the entire hold period ( 3 to 7 years).  I wound create substantial  equity and appreciation by buying in an emerging market, rehab, and then raise the rents. My investor would be first lien holder on the property, making his risk no different then a bank offering traditional financing with the property acting as collateral. 

I'm working on two deals now. One is a 12-unit apartment complex the other is an 80 room hotel that I would convert into 35 loft apartments. Both of these properties are distressed, both properties intimidate other investors. The city is pumping money in and around these properties and by all credible forecast, they'll only appreciate in value. So If I can give this investor a passive stream of income (10% preferred interest) and solid appreciation, all secured by a hard asset, then it seems like a 50/50 split would be warranted. 

Thanks for the reply Karen. I'll take your advice search the BP threads for different ways to structure the JV.

Hey Chris, the equity investment is something that I was planning on pushing, primarily because I know he is looking for a tax shelter.  I like the debt investment idea. I think I would have to do a cash out refinance with a traditional bank once the property was repositioned though. This particular investor is looking for something more long term, 5 to 7 years, that seems too long to pay a private investor back at 8-12%. 

Thanks for the comment Joe. So do you think if said investor is a first lien holder of the property, would a 50/50 split be reasonable? 

I have a high net worth individual that is willing to invest with me and I'm not sure how to structure the partnership. Along with some property holdings, I have a construction/property management company.  We would be after distressed properties in slightly marginal, but rejuvenating areas to add the most value possible. If my investor finances  100% of the purchase and rehab of the property and my company does all construction work, repositions the property, raises rents, and manages the property, what would a fair split be? I was thinking 50/50 split on everything, cash flow and appreciation. Is this fair for both parties? If things go well with this investor we could do a lot of work together, but I want both parties to be compensated.