All Forum Posts by: Jonathan Twombly

@Hunter Thompson  Absolutely.  Each entity is legally separate.  If you commingle the funds from entities in any way, you jeopardize their legal separateness, which could potentially lead a court to disregard the LLCs and make all the assets attachable.  You need to keep separate books, have separate accounts, and be very strict about maintaining the separateness.  You definitely need to hire a good accounting firm to keep the books, or hire a management company that will keep everything in good order.

@Taylor Vick  Seems like a pretty tried and true strategy.  To expand beyond the circle of affluent people down in Greenville, perhaps you want to start doing social media and SEO to begin to attract people into your platform who don't live in your area.  As you probably know, you cannot solicit them for deals until you establish a relationship, but you can get the relationship part started if you have an inbound lead marketing strategy to collect more leads.  Then you could hold online webinars to discuss what you are doing.  Just take your in person strategy online!

@Hunter Thompson I'm not sure what you are referring to, exactly.  But here's how we do it.  The asset management company has no ownership interest in the property LLCs.  It's connection is through an asset management agreement with the property.  The asset management company collects asset management fees from the properties in exchange for overseeing them.

The holding company has B shares in the property LLC. (The investors have A shares, which allow them to collect their preferred interest. We need two classes of shares to delineate between who receives priority in the distribution of proceeds.) The holding company receives its share of profits from the properties, assuming there is any left over when the preferred returns are paid out.

Hope that answers the question.

@Andrew Johnson  The NREI article actually talks about what you are seeing - few properties on the market, at high prices.  Interesting that you are seeing them stay on the market without moving.  What I am seeing (and hearing from friends) is the experience of being constantly outbid, with ridiculous offers, on properties they are trying to acquire.

@Hunter Thompson This is how we do it. Each property is in a separate "single-purpose entity" that is an LLC. The lenders actually require us to do it this way. Then we have an LLC for our asset management firm, which oversees each property and a separate LLC that is a holding company for our promoted interest/carried interest on each deal. We also have dropped LLCs below the holding company (i.e., they are wholly owned by the holding company) for our real estate brokerage firm and our media company.

@Taylor Vick  It's impressive what you have done so far.  Would you share your methods now so people don't repeat what you're already doing?

Two articles that appeared in the trade press yesterday suggest that it may be happening.

First, in Globe Street, there appeared an article called "In Volume Dropoff, It's 2017, Not 2007."

This article cited a Real Capital Analytics report suggesting that commercial real estate investment sales in 2Q 2017 were 5% less than in the same quarter of 2016. In addition, investment volume is now 13% lower than at the peak of this cycle in 4Q 2015. However, the authors argue that a 2007-style crash is not happening. In 2007, six quarters after the peak, sales volume was down by 83%. That's 70 points higher than in the current cycle. So, perhaps we are heading for a soft landing.

In the other article, "Pullback Continues in the Investment Sales Market for Apartment Properties," in National Real Estate Investor, the article argues that "sales of single properties are slowing, suggesting broad correction in the market." In that article, it suggested that things are actually worse than they seem, because much of the soft volume was actually contributed by the sale of a single huge portfolio. Without that sale, volume would have been even lower. The article suggests that what we are seeing is simply a normal "reversion to historical norms," meaning in English a normal correction.

What's your view? What are you seeing in the markets where you're active? Is volume as strong as ever? Or is it tailing off?

Please PM me.  @Account Closed

@Chris Co  The dollar is cheap because foreign investors are NOT buying. That's what causes it to drop. Of course, when the dollar is low that will cause some investors to view US assets as cheap and to come back into the market again. Enough of them come back and the dollar will rise again.  

Of course there could be other factors involved in currency fluctuations.  But in general if the dollar is high it's because foreigners think this is a desirable market to invest in and they are demanding a lot of US assets.  

 No doubt they are.  But my point is that this is marketing materials aimed at investors in their funds, who really don't know much about real estate, but this confirms all their biases - they like big cities and important universities.  Relying on marketing materials for guidance on the market is not the best idea, and clearly you seem to be someone who understands that.  But I am afraid a lot of people do not.  So many people on this site are chasing "hot" markets, and it's really not the best way to invest, IMHO.