All Forum Posts by: Kevin S.
Kevin S. has started 24 posts and replied 395 times.
Post: How do Long-Term Airbnb's work?
- Posts 399
- Votes 240
I think the asking price may be more than if it was based on LTR since cash flow will be more with MTR/Airbnb.
Post: What exactly is meant by "the promote"?
- Posts 399
- Votes 240
Quote from @Arn Cenedella:
Good question.
I should have been more clear.
The LPs get investors the passive investors get 75% of the profit. The General Partners the GPs the operators get 25% of the profit. It’s a reasonable arrangement as the LPs put up most of the cash and the GPs do all the work in addition to signing on the loan. The LPs get most of the profit.
Thanks Arn
Post: Getting Started--- What would you do in my position?
- Posts 399
- Votes 240
With a typical LTR property @ 7% cap rate someone would need to buy with either cash for about 7M to get $500,000 cash flow or it's equivalent of equity if leveraged? Either way the figure is about 7M??
Post: What exactly is meant by "the promote"?
- Posts 399
- Votes 240
Quote from @Arn Cenedella:
First I would like to correct some incorrect information on this thread.
Most of the compensation earned by General Partners is NOT at the start of the deal but rather at the END of the deal based on how well - how profitable the deal is.
The acquisition fee paid at the start of the deal is generally 1% to 3% pending deal size.
The GP share of the profit at the END of the deal also know as the PROMOTE is generally 20% to 30% of the profit (big picture high level).
If a property is purchased at $4M and sold 5 years later at $6M, the profit (big picture high level for illustration purposes only) is $2M.
The acquisition fee would be 2% of $4M or $80,0000.
In a 75/25 split, GP share of the $2M “profit” would be $500,000.
I believe $500,000 is larger than $80,000. 😀
Yes you are correct the promote is the GP share of the profit. if you were to partner with this operator, you don’t get ALL the promote as it is split among everyone in the GP team.
So in the example above if you had 10% of the GP, your share often profit would be $50,000.
Let me define (big picture high level) - numbers for illustration only they neglect closing costs of sale and pref payment paid investors during the hold).
Your share of the GP is calculated on what you do and what you bring in terms of capital. There are industry standards for this but that’s a post for another day.
Hi Arn, in your example who gets the 75% (1.5M) of the 2M profit? I am just following this post and trying to learn. Thanks.
Quote from @Kristen L Garner:
Hey Charles, conforming loans will not allow you to close in an LLC. You would need to close in your personal name and then quit claim to an LLC at a later time. However, non conforming loans (aka nonQM) such as DSCR allow you to close in an LLC. Rates are typically higher for DSCR vs conventional but you can offset that with the way you structure the loan - like adding a small prepayment penalty or increasing the DSCR ratio bracket for example. Best of luck!
Hi Kristen, I am jumping in here quickly with question on Lenders and NMLS ID. Recently I was talking with a lender and after much communication back and forth I found out he did not have NMLS ID number and I was told he works 'under' someone else (within the company). I notice you listed a lot of NMLS ID unlike most lender that list one or two NMLS. Also, the NMLS ID are different in different states as well as same in multiple states.
I am hoping you can shed some light as to how this whole NMLS work.
1. Is it ok to work with someone who doesn't have his own NMLS? Should it be a concern?
2. How do I verify if NMLS ID is active?
3. Is the listed NMLS belong to the company or individual? Are individuals(loan officers) supposed to have their own NMLS besides the company NMLS?
4. Reason your listed NMLS is same for several states and different for others.
5. Anything else I need to know when choosing a lender(or mortgage broker). Thank you.
Post: What to do with $1,000,000.00?
- Posts 399
- Votes 240
Quote from @Dennis S.:
Quote from @Kevin S.:
Thanks Dennis. I had a feeling your answer might be just what you said. Guess I wanted to hear it from the horse's mouth, is all. Is there a danger one could end up taking more from the LOC account if say rent doesn't equal to withdrawal due to vacancy or tenant not paying rent etc? If I adjust withdrawal form LOC because of those variables then it defeats the purpose of consistency. That last one was a question rather than a statement btw :)
Also from the rental income perspective, its common to see variances from monthly cashflow and the projected cashflow (spreadsheet cashflow), but if one is conservative in the projections then most likely the projected cashflow over 6 - 12 months matches the expected withdrawal.
Hasn't many of the dividend aristocrat lost up to half their value? MMM, T, WBA etc...
Post: Do I need a CPA? ANSWER INSIDE
- Posts 399
- Votes 240
If I am a business owner in Texas and looking to start investing in RE, do I look for accountant who will take care of my business accounting as well as RE investing side of it?
Do accountants geared towards RE investors stay out of 'business' accounting?
Do business accountants do a better job of the business side than a RE accountant?
Post: Do I need a CPA? ANSWER INSIDE
- Posts 399
- Votes 240
Quote from @Kory Reynolds:
Your answer to those questions will be "it depends" - it depends on the state and local jurisdictions that you and your real estate investments (or other business ventures) are subject to. The CPA themselves don't need to be local, what is important is that they (or their team) can address any specialty concerns of your locality. And even then...many state / local jurisdictions require effectively no specialty knowledge.
There is definitely no one size fits all for how to look for a CPA / firm - it is going to be highly individualistic.
Thanks. Just like choosing an attorney that should be licensed in the state of his/her client (state law applies and differs) I wasn't sure if the same hold true for accountants and whether local tax laws differ from state to state. Especially an investor who is not a W2 earner but has small business.
Post: What to do with $1,000,000.00?
- Posts 399
- Votes 240
Thanks Dennis. I had a feeling your answer might be just what you said. Guess I wanted to hear it from the horse's mouth, is all. Is there a danger one could end up taking more from the LOC account if say rent doesn't equal to withdrawal due to vacancy or tenant not paying rent etc? If I adjust withdrawal form LOC because of those variables then it defeats the purpose of consistency. That last one was a question rather than a statement btw :)
Post: Do I need a CPA? ANSWER INSIDE
- Posts 399
- Votes 240
Thanks Jana. You answered question 'to the point' by far. Should accountant handling RE need to be local to the state? Are there state laws in addition to IRS rules in RE investments that makes it better to choose local?