All Forum Posts by: David Lilley

10% is common for your balance sheet and signing on the loan.

Find someone with access to Costar. You can run a historical/forecast cap rate report.

@Scott M. hit the nail on the head.

What @Greg Scott said. In fact, most banks require your LLC be a Single Asset Entity (SAE).

@Alex Euziere Libby Sparks for your Real Estate Attorney and Securities/Tax needs. Shifflett and Philips CPA for taxes.

 Under promising should be irrelevant to this post. I think the readers are here to find out how much you can actually make in this type of investment.

As far as the legality of over promising, there is nothing illegal about it. However, without the right disclosures and legal filings, yes, you can be sued for getting it wrong. 

The above are conservative estimates. In our syndications, our LPs typically achieve a 1.75x - 2x equity multiple in 2-3 years and as the GP, I achieve a 2-4x on my investment.

The more active you are in the investment the faster you will grow your capital. 

@Pratik Sheth it is not a one or the other situation. On every property we buy we immediately do a cost seg study and take the bonus depreciation in year 1. With bonus depreciation we typically get $1 of depreciation for every $1 invested, so if you had $100,000 of equity into a multifamily property, you would get $100,000 in depreciation year 1.

As Real Estate Professionals, we do this to shield all of our ordinary income from being taxed. If you do not qualify as a Real Estate Professional, then your passive losses (depreciation) can only offset your passive gains.

At the end of the hold period we always 1031 Exchange into the next investment to defer taxes on our capital gains and avoid depreciation recapture. Then, we complete another cost seg study / bonus depreciation and the cycle starts over again.

If you are not holding the asset for at least a year then you cannot 1031 exchange and taking bonus depreciation would not be advised. If you intend to own the asset less than 3 years and do not intend to 1031 Exchange out of the investment then it is probably not worth it in that case either. 

If you don't have property management lined up (and I mean a GREAT property management team), and a General Contractor that you know and trust and have worked with before, then get that figured out ASAP. Feel free to message me with any questions you have @Shawn Long

@Phil Pat the answer to that question is entirely up to you. Are you satisfied with the projected cash flow and overall return on your investment? Would the deal be a needed step in accomplishing your goals?

For me, I would only buy a fully renovated asset if it were under priced with significant in place yield (cash flow), or if the area was phenomenal and I were projecting some aggressive rent growth/appreciation.