All Forum Posts by: Daniel McNulty

@Ellie Perlman

Beautifully articulated! Thanks for sharing.

I would also emphasize step 2 because validating sponsor competence and track records traditionally is the hardest part.

For step 5, I find getting your hands on past deal terms and projections to make pre / post comparisons is one of the most useful tools for evaluating assumptions.

One last item that I always like to have is a macro and regulatory discussion as it can separate the wheat from the chaff. With cap rates historically tied to interest rates, and regulatory consequences wreaking havoc these days, I want to hear a competent plan forward. Whether it’s hedging or intimate knowledge of local legislation, it is a top performer skill set that mediocre syndicators rarely have.

@Maria Marrero

If it is giving you head aches and you dread those calls, SELL IT. There are plenty of other ways to be passively involved in RE. Life is too short...

@Steve Mel

Happy to share offline. I’ll send you a PM.

@Steve Me

I always start with a google of their regulatory filings.

Looks like the fund is only 25M with 2.5M explicitly called out as an one time structuring fee.

That is WAY above average fees and is way below average fund size. Unlike other asset classes, the top quartile performers of venture tend to consistently do so. This consistency is true for a variety of reasons beyond the scope of this post.

Without knowing anything more than that, seems below average.

@Amy Wan

Maybe we are discussing different regulations?

My understanding of the regulation is that it explicitly limits the number of investors in 506b /c, regardless of entity type.

The common pass through structure, LLCs are more so for tax treatment and could in theory accept an unlimited number of investors if the regulations were updated.

Are you suggesting a C Corp under Reg 506 could accept more?

The basis of my question is that the investor limit often drives minimums high enough that it would not matter if one was accredited. My qualm is that if not for those limitations, minimum entry points would be lower, opening up a larger number of investors to real estate and or other private asset classes.

Technically speaking it seems the updates Reg is hoping to do just that, but practically speaking I have my doubts on its effect.

@Amy Wan

That is a huge step forward. However, I fear it is a half baked solution until they address the arbitrary limitation on the number of accredited investors in Reg D offerings.

Progress is progress, I suppose.

@Mike Smith

Citing experience like that is all too common these days. To be frank, if you are just getting started, you might error on the side of conservatism. Find a sponsor with double digit exits and a verifiable track record. I assure you they are out there.

The requests you made are quite reasonable and if they cannot produce them, walk away. Though, the 08 crisis was 12 years ago now, so you will eliminate quite a few sponsors in that regard, but again, conservatism ought to supersede hype.

I am somewhat on the other side in regards to acquisition fees.  The health of the sponsor's organization is as important as the deal itself, which is why I am not afraid of it. It is all about balance though. If a acquisition fee exists, I better not see admin fees and the mgmt fee / split ought to be reasonable.

I would add audited financials to your list above for any deals they have done. Any operator worth their weight in salt will have their finances in order. 

Trust but verify.

@Maximo Jacobo

There are no guaranteed returns. Any return is possible but involves trade offs.

If you are saving for a purchase, it is normally best to keep it in a low risk account to keep you on track for said planned purchase.

Some people like to keep their cash reserves in index funds. That is arguably a little more risky, but it works for some people. 

IRAs, 401ks, Roths, etc all have their uses in a tax planning conversation, but may be more effort than its worth for your purpose here, to make a purchase.

For short term cash reserves (less than 1 year) the rate you get hardly matters and will almost never impact your purchase decision. Your savings rate will normally be a more impactful number to boost than a savings yield. 

I have seen a number of GoFundMe links on registries to pay for honeymoons.

I suppose you could dream up a number of other items too such as car payoff or student loan pay off. Whatever you do, I would avoid asking generally for slush fund money.

Be specific or it may be a turn off for your guests, friends and family.

@Joshua T Poulin

That is out of pocket. With the use of loans that asset number may need to be doubled.

Those are just off the cuff estimates using the 1% rule and factoring reasonable expense ratios. It would certainly depend on a lot of factors though.