All Forum Posts by: David Lilley

@Wayne Brooks there will always be a guarantor. If though it is non-recourse, you are personally liable if you violate any of the "bad boy" carve-outs (fraud, etc).

@Joe Ansley network, network, network. Go to REI meetups, talk to everyone, or pay for a mentor if you have to. Make sure you are looking for properties over $1.35mm so you can get non-recourse debt. Highly doubt anyone would sign on a recourse loan.

@LaVonne Eaton I highly doubt a company doing business like this checked all the necessary legal boxes when raising capital. Are they in violation of the company agreement? Did you sign a Subscription Agreement or see a PPM? If not, I would report them to the SEC.

@Joe Ansley do you mean someone with enough net worth and liquidity to sign the loan docs?

@Dane Ohlen is the go to guy. He does the renovations on all our multifamily value-add deals and also renovated my personal residence!

@Thomas Wang go solo if this is your first multifamily investment. It doesn't matter how much you think you might know, you will learn a TON with that first property. Learn on your own dime, not your investors. Prove your business plan with that first investment and raise money for the next one.

However, I think as long as you're putting up at least 50% of the capital it would be reasonable to take in a few investors on the first deal. Hopefully you are very confident in your abilities!

Despite how well you do on your first investment, it takes time to build an investor pool. Getting a few investors in on the first deal will only help with other deals down the road. 

@William Merone common structures are 80/20 - 70/30 (investor/sponsor) splits with 6-8% preferred returns for investors (investors have to make this annual return before profits are shared with the sponsor. Cashout refinances are common as investors like to get their money back quickly which limits the associated risk, but ownership percentages don't change even when 100% of their capital is returned.

Having said that, the ways in which you can structure these deals are only limited by your imagination and your ability to communicate the structure on the company Operating Agreement. 

@William Merone that is a structure you could work with less sophisticated investors, but that is not likely to be a sustainable model. No one will want to be cashed out and miss out on the upside of an investment. Most would find that to be a very shady practice. 

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $4,800,000
Cash invested: $1,200,000

Qualified Opportunity Zone Fund
Hold Period: 7-10 years
Return of Capital: 100% return of capital by year 3 via cashout refinance
Target IRR: 18.43%
Day 1 Cash Return: 12%+

Valued at $5,350,000 in 2017, this is a great opportunity to acquire a stabilized asset below replacement cost and below market value (under contract at $4.8mm) with day one cash returns over 12%.

What made you interested in investing in this type of deal?

High in-place yield

How did you find this deal and how did you negotiate it?

Off-market through industry contacts.

How did you finance this deal?

Freddie Mac SBL

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $4,800,000
Cash invested: $1,200,000

Qualified Opportunity Zone Fund
Hold Period: 7-10 years
Return of Capital: 100% return of capital by year 3 via cashout refinance
Target IRR: 18.43%
Day 1 Cash Return: 12%+

2120 52nd St. was extensively renovated in 2017 with $3,200,000 in capital improvements reported. Residents have access to onsite laundry facilities, onsite property management, and controlled access gate entry for privacy and security.

Valued at $5,350,000 in 2017, this is a great opportunity to acquire a stabilized asset below replacement cost and below market value (under contract at $4.8mm) with day one cash returns over 12%.

What made you interested in investing in this type of deal?

High in-place yield

How did you find this deal and how did you negotiate it?

Off-market through industry contacts.

How did you finance this deal?

Freddie Mac SBL

@Alex Rodriguez make sure you have the conversation about what your roles will be. This can even be defined in the Op Agreement to reference later.

So you're going to house-hack, which one of you will be doing the rehab? That is where I could see this being an issue if your partner gets lazy on you.

When we bought our first multifamily, our Op Agreement for the partnership was pretty simple- I was the President and had full authority. The other officers could be as involved as they wanted.