All Forum Posts by: Bobby Larsen

@AJ H.

In that case, and assuming you sourced the acquisition, you’re really just looking for someone experienced to asset manage the property so I’d structure it based on cash flow- maybe 1-3% of revenue annually. I’m assuming they still won’t be the property manager so this is separate from the property management fee.

If you were steadfast on wanting to compensate them through GP ownership or maybe it’s required by your lender then maybe 10%. Or, do a combination of the two which would be an asset management fee plus a performance bonus at sale. Again, all of this really depends on the size of the property.

@AJ H.

Depends on what they’re bringing to the table. For net worth, experience and liquidity, the typically range is 20-30% of the GP or a 1-3% upfront fee.

If they’re raising capital as well as the above then I would expect it to be dependent on how much capital they raise. If it’s close to half the a quarter or half the capital then probably 50% of the GP.

@Jay Hinrichs

Deferred equity can absolutely be tax deferred if structured as an earn out.

@Clay Cook

Google Chatham Financial and get on their mailer. They email an updated yield curve for LIBOR and SOFR every Monday. No guarantee that rates follow those projections but if I was able to predict rates more accurately that the yield curve, I’d be a bond trader. Use the yield curve to adjust your projected interest rate throughout your hold period.

@Dennis Nikolaev

I personally prefer Tampa over Houston and I’d put NC over Houston as well. Tampa is booming and it doesn’t get quite as impacted by bad weather as Houston. Nothing against Texas, I actually love the state, but the amount of development and ease of construction has always made me nervous.

I agree with what others have said about property taxes but Florida has relatively high property taxes as well, albeit probably 2/3 of Texas. Insurance costs are crazy in both markets as well.

@Steve S.

Let us know the approximate size and market, and I’m sure someone here can help you out.

@Scott Lieberg it’ll depend on the deal but RealtyMogul and CrowdStreet are two of the best. They are pretty strict on sponsors though.

@Austin Liebman network, network, network. Makes sure everyone in your friends and family circle know what you’re working on this. At that size, I would focus on the friends and family. If you find another partner to come in to provide equity, you’ll be giving away a significant portion of the GP on an already small deal.

1% rule in PNW? I can’t even remember when that was possible unless you were in tertiary markets and even that is impossible now. The 1% rule has historically only worked in areas that are very landlord friendly where expense ratios are higher. Or, if you’re buying C- properties. 

The 1% rule ignores expenses so keep that in mind. For 50+ unit properties, you’re probably operating between a 35-40% expense ratio in California, PNW, and most of the western US. Whereas in other parts of the country, you’re probably operating with a 40-60% expense ratio.

@Doonie Johnson

Doors always open, let me know if you want to chat.

Our first acquisition was in Beaverton but we look for properties in WA, OR, NV, AZ, CA, NM, UT, ID, CO and FL.