All Forum Posts by: Chris Grenzig

@Anders Jax If you are raising the money and rolling you "fees" into the deal I would always push for GP side instead of LP. Usually GP money has no hurdles, and you also get a % of the hurdles that is going to the GP on cash flow and sale, so you would make a much better multiple on your money as a GP instead of an LP.

In terms of a waterfall structure, it's so subjective, but I prefer to not take more than the investor unless it's a higher threshold, and I only do 2 hurdles max to just simplify things. Ex. 6% pref, 80-20 to 12, 65-35 over that (stated as investor-sponsor share over hurdle).  However, it's just on preference and who their investors are. But I'll tell you one thing if they can't raise the money on those hurdles, I can almost guarantee they'll change up the hurdles and fees before losing money on a deposit and other costs to run a deal. It's all a negotiation and what sponsor/investors are willing to take. And conversely, someone in a 1031 who owes a lot of money and desperately needs a deal may accept more sponsor favorable terms to get their money in tax deferred...

It's all about who's got the leverage.

@Anders Jax 12-36 month timeframe, sometimes with also contains a no fee agreement after certain amount of deals/dollars from that company/investor. Also, sometimes will involve a step-down for that company/investor in fees received/paid after a certain amount of deals/time/dollars raised. 

End of the day it's about what your leverage is, what can the deal support, and what are you willing to pay/get paid. I also wouldn't overlook rolling fee into the deal or accepting a certain % of GP. 

@Stephen D. find someone experienced, and bring them deals and money for a percentage of the GP side. Doesn't matter if you're 1 or 100% of GP side, you now have a budding track record. Start small and be patient, these things take time. If you want to find deals and want more credibility behind your name, talk to someone experienced and see if you can say you work with/for them and here is there track record. However, don't abuse that because if you start throwing out left right and center and piss them off, they're going to tell you to stop and not work with you again.

@Anders Jax people we work with are usually between 1-3%, but at the end of the day its what you're willing to pay for, or what you're willing to take. I personally think 3% is high though.

@Prolet Miteva I would just use what you invested, especially if you are not controlling the investment as it may be tough to gauge the value today. Personally, I'd always prefer to be lower than real and be happy when that investment sells, than overestimate and end up being lower than I thought. 

Also, if the net worth number is for a bank or something they're going to ask you to prove it and is a bank really going to believe you when you say you're $100k is worth $200k but we haven't sold it yet? If it's just to calculate your own net worth just to have a number attached to it, then it's whatever makes you happy.

@Dennis Tierney we're buying a property with 175 FPL stab-lock that we are replacing about about $650 a pop, so $90k do 30 units seems crazy high. I would get a larger company in that does MF properties to bid it out, I would expect it should cost you $20-40k rather than 90k.

@Greg Callan I wouldn't get to caught up on cap rates for 1-4 units, it's just a bad sign for me when you're proforma cap rate is 4.5% and you're borrowing money from the bank at 4.75%. Now if you think expenses will be 35-40% that cap rate changes so it's tough for me to say exactly, but for me I would want a proforma cap rate north of a 7% on a 4.75% debt rate, but its different for everyone.

You're best bet is commercial brokers in the area for cap rate reserch, but they're going to be talking cap rates on probably 10+ units if not 30/50+ units. A lot of times they don't sell unit lower properties, so I would avoid the big shops and see if you can find a local brokerage on loopnet and call and have a conversation with someone there. I would also ask if they have any recent reports on the markets and submarkets from axiometrics, yardi matrix, costar, etc. 

@Greg Callan $850 avg rent for 4 occupied units is $40,800 per year. 50% leaves $20,400 in NOI. On your purchase price you're buying this property at a 4.5% cap rate. This seems very overpriced imo, however, if you want large tax losses to offset any other gains from other stuff then it could be a great deal if you think their could be appreciation.

It's all about your internal and external goals and what you want to achieve, but on a purely numbers basis I would pass. Also, I think no offer is insulting, but thats just me.

@Austin P. if you're looking for 10+ units and up, call a few brokers , get their opinion, then ask if they have any reports on the market they can send you from yardi, axiometrics, costar, etc. and just try and get a feel. Also, cap rates will change submarket to submarket, so to go on Kansas City alone would not be a great indicator either. These reports should break it down by submarket and with past quarterly and annual reports and with their "projections" on a slew of different metrics also.

@Michael J Ralph at the end of the day it's whether you want to manage the property yourself or not, and if the returns meet your goals. If $5k give or take in cash flow is enough money on your investment than I would say do it. If you're going to use 90% of your net worth and your not going to use a manager and you think you're likely to burn out alone, maybe it's not the right move. You got to know yourself and what you want to get out of this. If you want a hands on learning experience, and you're willing to risk this money on an investment, and $5k a year is a great return in your opinion than it sounds great. 

No one can or should tell you what to do here because theres so many internal or external factors. Best of luck!