All Forum Posts by: Account Closed

Based on your experience, what are the best cities to invest in the next couple of years?

The city i live in (los angeles) is overpriced and most of investments i've seen lately do not make any sense; i'm therefore compelled to now look for opportunities in other cities and states where the markets are still recovering.

The strategy would be mosty buy and hold; value added multifamily and single family portfolios projects; the strategy would be to buy at a discount, rehab, lease, refi, and move to the next project

Criterias:

- minimum 1-2m+ metro areas

- landlord friendly laws

- minimum 10% net cap rates

- strong appreciation

- low vacancies / supply

- low property taxes

- low income taxes

- low price to income ratios

- positive demographics

- healthy local economy

I've done some researches and found that Detroit, Cleveland, Indianapolis, Pittsburg could eventually be interesting markets despite weak demographics; at least for the next couple of years

What's your take about that?

aha, no offense taken:)

Your investments sounds good; however, it is still a small investment and very labor intensive imho

The thing is that whatever money you invest, the work load and hassles remain pretty much the same if you invest 200k in 10 units or 20m in 50 units in a larger city, so i'd rather syndicate, raise money, leverage and do larger deals with smaller cap rates than micro managing a portfolio of 100 small investments; just another strategy

But if after vacancies, taxes, management etc, you still get 15%, that's great for you

What do you think about Detroit btw? i've heard the market is pretty right now; i've seen above20% appreciation of the past year; pretty crazy

As far as predicting appreciation, there is 95% of the time a direct correlation between demographics / supply, economics and price increases; so it is more predictable than what people may think

check this out:

http://lenkiefer.com/2016/05/22/population-growth-...

@Engelo Rumora

could you elaborate about your 15% net deals?

From at i've seen these kind of yields are only achievable in risky markets (negative demographics, high unemployment, etc..) and with small rental investments yielding very little money per door; thus extremely labor intensive.

If you find me a minimum $2m+ REI yielding 15% net in a stable and growing market, let me know!

Btw, a cap rate alone doesn't mean much if we do not talk about appreciation

@Evelyn Tilman

I don't have anyone to suggest, but given the size of the deal i would avoid hiring a cpa/ lawyer to look into this and rather try to educate myself. 

The professionals dealing with foreign investors are usually very expensive, and will cost you thousands and thousands for informations you can find at no cost on internet. Looking at your name, i guess your dad is either German or Austrian. You should easily find what you are looking for if you still want to bring him into the transaction.

I am no expert and you should do your own researches, but for a small investment like the one you plan, i would keep my old people out of the deal, and find a local equity partner in your relations with good credit. Again, think about the loan. Banks usually always run credit and income/asset check for all the equity partners

If you don't find a partner then you could maybe just draft a lending agreement between your father and you, and purchase the investment yourself

@Evelyn Tilman

In my opinion you should avoid if you can bringing your "foreign" dad in the deal. 

I've myself gone through this and i wouldn't do it again.

The US tax system is generally defavorable to foreign investors, notably in the fact that unless a special agreement has been drafted between your father's country and the US, his estate could be taxed at a confiscatory rate of 40% above $60,000 if he passes away.

I'm not going to go over all the problems you and your dad may encounter, but maybe you should work out something and avoid having him on the title

The investment is small and will have IMHO too many complications to make any sense.

If you decide to go ahead regardless, draft a power of attorney with your dad allowing you to carry banking and legal operations in his name. 

If not, he will have to go schedule appointments with the US embassy notary and $50 each time a legal document needs to be recorded

@Evelyn Tilman

There is no problem wiring whatever amount of money from your family abroad to the US; however depending on how you plan to structure your acquisition, a few issues can arise

Is your father lending you the money? is he an equity partner? is it a donation?

If he plans to be an equity partner, your father will be considered as a non resident alien with the tax consequences it carries. FIRPTA, potential double taxation in the US and his country, etc...

On top of it, lenders are usually very reluctant to issue a loan to a NRA and for deals where a NRA is involved. The reason is that recovering their money in case of foreclosure can be complicated, and that foreign incomes are not easily verifiable neither a guaranty against the loan.

You must read the tax treaty between your country and the US

@Don Konipol

Don, thank you very much for the detailled explanation 

Yes, i guessed so; rates such as 12%-15% do not make sense in the current market

For a newbie like me, setting up my own investment platform could indeed be a good start in the syndication business. That would also be a good showcase for my completed projects.

Ultimately, the goal is to create a private equity fund, maybe that syndication track record could help me achieve that.

The only problem i expect with setting up a crowdfunding platform to raise debt or equity is that it is subject to the SEC regulation and that you probably need a security attorney to oversee the capitalization process..

Are most of the syndicated deals core plus and value added investments?

I rarely see syndicated opportunistic type investments such as ground up construction, raw land development etc.. 

Another source of equity i was thinking about could also be presale in the case of land development and condos construction; even though i have no clue how it works in the US but it is widespread and easy to conduct in my home country, France

does anybody has some experience with pre sale condos developments?

50/50 equity debt would greatly reduce the return of the investment.. but if it is the only way to raise affordable debt without unlimited liability i guess this is the way to go

Beside the loan, is it customary in syndicated deals to raise mezzanine debt to bridge the gap and reach a satisfactory level of return on equity?

Thanks for the feedback; that structure would look very unattractive to a prospective investor 

I would have a hard time marketing an investment if investors are liable beyond their investment on their own assets, especially if they only are limited partners, and if they have to personnaly go through credit underwritting. 

I don't see how the loan could be anything else but non recourse and exclusively asset based 

The LTV would probably have to be more conservative like 30-35% indeed

Have you yourself sponsored deals where all majority partners went through credit and income verification? 

I don't really see what difference it would make to the bank for a deal of that size, especially if the loan is non recourse

Let's say one syndicates a deal to purchase a $30m apartment building with 25% down;

Who is going to secure the loan? Obviously, the sponsor isn't going to carry a $30m debt himself and be the only guarantor 

Theorically the deal should be structured as a GP or a LP, the property transfered into the LLC, thus the loan should be underwritten under the company's name and therefore all partners should be tied to the loan.

Can anyone explain how the financing should be structured?