All Forum Posts by: Kris Wong

Funds are a type of syndication. Funds are used to purchase multiple assets. More commonly, in my experience, syndications are asset specific. i.e., I am buying this $10MM multifamily property, and I am raising money for that specific deal.

A sponsor talking about a fund or deal on a public forum like BP is considered advertising, and may be illegal depending on which exemption to registration is being used. If someone is advertising, they can only accept accredited investors into their fund/deal.

This is called syndication. It is regulated by the SEC. These deals are expensive to structure legally (in the neighborhood of $10K - $20K). If you all live in the same state, it may be a little simpler. You should start by searching for real estate syndication, and Rule 506(b) of Reg D (https://www.sec.gov/smallbusiness/exemptofferings/rule506b).

In that class of neighborhood, I believe renters are going to be looking for the luxury vinyl. The unit will be easier to rent and you will probably be able to charge slightly more. Given that the useful lifetime of vinyl plank is significantly longer than carpet, at the end of the day it's the better investment IMO. This is why pretty much all deal sponsors I know are going with luxury vinyl.

The immediate issues I see are:

- You want to close on the properties in your own name. That means your partners, legally speaking, have no ownership in these properties. If you kill someone in a car accident and get sued, they could lose all of their equity. On the flip side, you are also personally liable for the operation of the business. You will have to open your own umbrella policy to protect yourself. That costs money.

- As @John Corey points out, if your bank statement shows $60K in "mystery fund" deposits, the lending bank will ask you about that. When you explain the situation, that will definitely cause issues with the loan.

Ohio does not recognize the series LLC. I use GFH in Cincinnati for company agreements, or you could go the online route since it's just your dad. If you will be using conventional financing, you will have to close in your personal names (and your names will be on the note). You can then deed the property to your LLC, but keep in mind that violates the due on sale clause of your mortgage. That being said, I have never heard of a lender calling a mortgage due in that scenario, as long as the payments are made. I have done it.

It's up to you how many properties you want to hold under each LLC. Obviously it costs to set each one up, but bundling them together increases your risk in the event of a lawsuit.

Before I answer your questions, I need to ask what size properties you plan to invest in? 2 - 4 unit properties have additional considerations due to differences in lending (residential vs. commercial).

Also, the size of the deals is a consideration in your first question. I suggest you estimate what your 1% "asset management" fee will earn you, and the number of hours you will work to earn it.

$60K in total contributions obviously won't get you too far, but maybe it gets you into a deal or 2, and allows you to provide a decent return to them. Is it worth it to you to deal with the overhead of a partnership?

You also need to understand that what you are proposing is syndication, and is technically under the purview of the SEC. Perhaps if it's only your 3 cousins investing, you are not concerned with that, but if you start to accept investments from others, you need to talk to an SEC attorney (or at least research the regulations on your own). If any of your investors were to sue you for whatever reason, you could find yourself in hot water.

Check out Cooper Electric. It's who my property manager uses, and even though we decided not to proceed with the electric work on our property, we had the best experience with them in getting a bid.

http://cooper-electric.net/

Avondale (& North Avondale) is a pretty big area. You are definitely starting to see progress creep into certain parts. IMO, it's a bit early for talk of "turned the corner". I am interested to hear what other local investors think. I haven't driven through there in a while. Either way, I would be careful investing here. I am sure there are still many streets that are still borderline C-/D class.

@Greg Dickerson hit the nail on the head. After that I would also recommend Crushing It by Brian Murray.

@Michael B. there are a number of deal sponsors here on BP. You can find them in the forums or on the podcast. Several deal sponsors have their own podcast. You can find them through events (conferences) hosted by major multifamily mentors. You can find them at local meetups that are focused on multifamily.