All Forum Posts by: Jim Groves

 Groundfloor is a solid portal but doesn't garner the same attention as the bigger platforms because they are focused on GA intrastate deals.  Since you're in Roswell, and I'm assuming you are looking for ATL area fix and flips, it's worth checking out.

 Bear in mind that was some time ago when home prices were in decline, but you're right, you're probably more in the 20% range today.  

Yes, we had options on the land, completed the zoning, purchased the land and then subdivided it into residential parcels.  We did not pursue the development of the homes, figuring that local builders carried a better brand name then we would.  One of the projects was outside of Richmond, BTW.

I prefer to stay in the land development side.  The builders bring their own financing and take the risk of resale.  In Richmond, figure the land parcel roughly equals 10-15% of the ultimate home sale price.  The builder has the experience and advantage of access to local subs to deliver the homes in a more cost effective manner.

 I've structured a couple JVs with resi home development and it wasn't necessary to create separate entities.  We entered a contract with a home developer that agreed to buy lots from us at a specified price upon delivery (grading, roads, water, sewer, utilities).  

@Ian Ippolito - I agree with your comment regarding underwriting. If there is one takeaway I have in the CRE industry, it's that everyone thinks they're better at underwriting than the next guy. Although understanding their process would be helpful, I don't think anyone can predict what deals work out and which ones don't. All I ask is that you appropriately price the deal and check that the facts presented are true and correct.

In regards to the comment about pre-funding I want to be clear that this is not any criticism of PoL, a site that I respect a lot.  "Pre-Funding" is not risk retention.  Mortgage lenders and conduit lenders all prefund loans.  If that represented true skin-in-the-game, there wouldn't be a need for Dodd-Frank regs.  An exec from a major conduit lender once said to a large audience "A good real estate loan is one that I can sell".  Understand that these sites are in the moving business, not the storage business.  Risking their capital, even if on a temporary basis, is still better than nothing but does not represent the same risk that it does to you, the investor.

In the crowdfunding business we have to get comfortable with Asymmetric Information.  The sponsor will always know more than we do, so I want to see them risk more than I do.  If I don't see that from a sponsor, I would prefer to see a major investor with knowledge of the market risking more.  I feel more comfortable when a major investor has blessed a deal with their own capital.  That's the direction I see this business going.  

 If you can get a copy of the lease, review to see what the LL and Tenant responsibilities are for on-going maintenance.  If the landlord is responsible for HVAC, Parking, Roof, etc., I wouldn't think it would be too difficult to get access for inspection as it would serve the tenant as well but you should definitely do it.  The cost of the inspection is a fraction of the rehab.

But regardless of the condition of the property, I wouldn't buy if I thought the tenant wasn't going to stay at that location.  Where the cap rates are these days, you can't afford significant downtime.

 If you think the market is going to drop, wouldn't you be better off selling?  A cash out refi is great until the loan reaches maturity and you can't sell or refinance.  That's what happened in 2008.

Yes @Jay Hinrichs, the site is free to join. I don't charge money for access, I'm looking to build a community where we can all contribute local knowledge to the deals that are being crowdfunded. The rating model doesn't work yet for typical HML deals, as it's designed for current or near current cash flow properties. I'm working on something that should hopefully work for non-cashflowing assets.

Above post is pretty standard, but if it's a larger deal with more equity required I would expect a better split. In my view, if the deal is lower on cash flow but has higher upside (IRR), go with the 8% pref and the higher split.

 Pretty much throughout the country the land meets the equity requirements (at least 20-30%) for a construction loan, and since you've probably already bought the land before closing the loan, they give you credit for it.

Where it gets tricky is in situations where you've owned the land for some time and claim that it is now worth X times the original purchase price.  I find that as long as the appraiser agrees, you get that credit too.

My cynical view is that the lenders give more credit towards the appraisal than they should, but the regulators require them to get one.