All Forum Posts by: Justin Moy

@Brandon Craig Really sorry to hear about this. To answer your question about suing, I'd start at your legal docs. If the attorney the syndicators used was somewhat decent, I don't imagine there will be much room to sue based on performance. 

The legal docs to investments like these are usually pretty locked in and there is a very deep understanding that projections are just that and not guaranteed, and the legal docs usually give the syndicators room to maneuver away from the original business plan if they feel it's the best decision. 

Where you MIGHT have some room to lay down the law is in communication. Usually in our deals we have communication standards in the contracts, some examples: 

We are required to send full financials every quarter

We are required to respond to inquiries from investors within 7 days

We are required to communicate any changes to the operations team (general partner removal from position, change in asset manager...etc) within a certain time period. 

If there are communication or project update standards in the legal docs and they are not meeting those, you may have some room. 

However, I imagine you'll spend some money on an attorney and I don't think you'll get much out of it, it sounds like the project is not in a place to liquidate and is in capital preservation mode at this point. 

I'll DM you some high level dd tips for future projects that have helped me a ton (historically they've been removed for some reason if I respond to the forum)

I think the very first question every investor needs to ask if if they want to be active or passive. 'Passive income' is really overused in the real estate industry. It takes a lot of work to find great deals and then to manage the renovations and tenants or managers. 

It's not like taking on a new 40 hour a week job, but it's not passive. 

If you want to be passive syndications and funds are your answer here 100%. 

Let an operating team do all the work, you come in with the capital when the deal is almost at the finish line of the purchase, then you're done once you complete your due diligence. 

If you want to be active then of course that path doesn't make much sense. 

Diversification and due diligence wins here. Being patient with the deals you want to invest in and expanding on your education to know what a 'good' deal really looks like. The problem is, everybody puts together deals they think are good, but in my experience as a lead underwriter, asset manager, and now fund manager, I throw out 99% of deals that are put in front of me.

Listen to podcasts about passive investments and how to conduct due diligence as an LP. 

Invest in different asset classes, sectors, geographies, operators, funds...a little bit everywhere until you start to get the hang of how to actually look at 'good' deals. 

And when in doubt, ask tons of questions before making the investment

I've seen/heard people getting more competitive bids in the higher risk markets, but yeah I do think the subtle increases 2-3% are a bit aggressive. 

I don't think they'll double like they did in the past but I've been hearing people get 5% renewals in FL which got hit the heaviest by some of the increases. In KS we got a 5% renewal as well but of course way different than FL area. 

Fairly common. That's why you do have to hold a certain standard for what you will and will not do or replace. Of course be a good person and give people a nice place to live, especially if you're raising rents, but be conscious of how far you let their requests go especially since you should hold the same standards for everyone. You don't want a tenant thinking they are being treated differently than the rest of the building because you replaced one persons refrigerator but not theirs

A lot of people are feeling the squeeze of cash flow right now at least for desirable markets. If you don't want to have roommates it's getting tough, for most of my investors who are looking for heavier cash flows I've been recommending doing furnished rentals (short or mid term), looking at higher cash flow commercial deals like NNN or other cash flow focused syndications/funds, or investing in a debt position if cash flow is the biggest goal.

More people are also pushing towards tertiary markets or looking for properties that have some ADU potential to juice their cashflow opportunities

The cap rate will depend on the market the property is in. A cap rate is essentially a measure of desirability for the market or neighborhood the property is in. 

Lower cap rate means people are willing to buy less cash flow because they appreciation potential is greater. At least for stabilized properties. 

Cap rates also tend to move with interest rates so we'll see them fluctuating soon

All lenders will require some type of experience on the team. If this is your first time rehabbing a property or purchasing a property like this with this extensive of a rehab, you'll want someone to partner with who is also willing to sign on the loan and meet the banks minimum liquidity, experience, and net worth requirements. 

Congrats on your progress! 

42 in the same area can start to get you some great scale. General rule of thumb is 1 full time property manager and 1 full time maintenance staff per every 100 units. Depending on the vintage. 

With 42 you can either continue to look for those 20-40 unit properties and get to some scale within the same market or start shooting for larger deals. 

If you want 300 in the next 3 years you'll likely have at least 1-2 larger (100+) unit deals to make it easier to manage.

You can purchase the property as an LLC or as an individual. I'd recommend an LLC.

You can create the LLC during the escrow period while you're completing inspections and finishing up the items for the bank.

Everything is negotiated in this space, if you and a seller agree to seller financing then you can have your lawyer draw up the paperwork to relay that. I would recommend hiring an attorney to write up and review your contracts