All Forum Posts by: Jeff Greenberg

@Todd Dexheimer is correct.  Partners need to have responsibilities and voting rights or they may be considered passive investors and your deal become a security.

@Steve Lyman if the 100k investor gets 10% of the deal and a pref return, what are you getting for all of the work that have done and are doing.  If everyone that puts money in gets a percentage of the property based on what you said, is your time effort and risk a donation, or is this a hobby?   What does someone get for signing on the loan.  Who is the asset manager working with the PM, or are you planning on making money as the PM. 

I use Tony Watson at Robert Hall and Associates in Glendale. 

Not to protect my cosigner, but to protect my investors, one of my properties bought a life insurance naming it as a beneficiary.  This was to make sure that there would be funds to pay someone to run, and later close out the deal.

@Jay Hinrichs This is something that I taught my children and now my grandchildren.  The common courtesy of saying thank you and showing appreciation.  No matter how much we help people without any expectation of anything in return, it is real nice when takes the effort to say thank you.  The old fashioned snail mail handwritten card means much more than an electronic thank you.  Good job Jay, for reminding us of simple good manners.  

In addition, you will remember that person above and beyond others, and maybe an opportunity will come up that you may pass onto that person.

If you are getting a loan from the private investors you may be able to avoid the SEC regulations.  As soon as you offer a piece of the profit, based on the sole effort of you and your partner, you enter into the securities world and have to follow their rules.  If you are going the path of profit sharing, I typically see a 50/50 split after all invested capital is returned. It would be up to your investors as far as your skin in the game, but if you are covering rehab costs, that may suffice.  Don't forget closing and loan costs in your calculations.

There are many syndicators on BP.  Talk to several of them and see if there you can find one that you feel comfortable working with.  

There may or may not be a correlation between cap rate and risk.  Here is an example. Is a 4 cap in LA less risky than a 6 cap in Dallas?  If you bought a property at a 1cap because of high vacancy, I wouldn't call this a low risk transaction.  The point is, typically a high cap rate may indicate that the property is in a bad area, but a low cap rate doesn't mean that it is a lower risk property.

@Ian McDonald first you need to work on your math.  If you have 10k in cash flow per month, why is the investor only getting $1150.  Where is the rest going?  The last time I looked there were 12 months in a year.  $1150 x 12=13,800.

Why would you want to all the work, bring in over half the money and still do a 50/50 split?  What are you getting paid for all of your work?

I also recommend that you never use the word guarantee.

How are you planning to buy a 1.128 mil property with $200,940 including closing costs, cap ex reserves, first years insurance, funding the operating, etc.

@Joe Kim those are good.  Here are a few more.

1. Diverse employment base
2. Recession resistant niche such as student housing, and mobile home parks. 
Your number 6 can solve most problems, but what is adequate?

@Jay Hinrichs I usually find myself agreeing with what you say, but I have to question your statement, "other wise go do it yourself."  Are you really implying that an inexperienced investor could safely get near the returns that most of us can get for our investors.

These times are certainly challenging, but as @Todd Dexheimer has stated, it is important to be conservative and keep an eye on the downside.  We are looking at 10 year terms, while our expected hold may be 3-5 on a value add deal.  We are also expecting to sell at a higher cap than we are buying at.  No one has a crystal ball, but if we plan on a correction and it doesn't come, our deals will be that much better.