All Forum Posts by: Kyle Davis

Hey BP!

I have been asked by a friend of mine to join him on partnering up on acquiring some deals.  My role in the business would be to be the analysis side of things along with structuring the offers on the purchase of apartments.  The other partner would be the money side of things.  We would also be hiring out a Operations Manager.  

We are in discussion about payment.  We already discussed that we would both be owners of whatever we acquired, but things haven't resolved in the category of percentages and/or base pay.  My original thought would be to take a small base pay salary as a significant amount of my time will be spent analyzing deals, but I also want to be a part owner of the apartments we acquire.  I was thinking something along the lines of taking a small salary so I can keep money coming in, and eventually as we acquire deals I can waive that base salary for more ownership in the apartments.  But I have zero clue on what I should get paid, or what percentage owner I should be.  Has anyone structured something like this that can provide some feedback?

Thanks!

Kyle

Hello there!

I'm still a relative "rookie" when it comes to real estate investing.  I have about 60 doors is all, but looking to grow that exponentially.  I'm curious about the Syndication model....but wondering about how to go about it.  At this moment, all my deals have been done by myself (funded through the local bank and/or creative financing....so no partners).  To do some larger unit transactions, I know I will need partners.  But what should "come first"?  The deal or creating the Syndication?  If Syndication should come first....what do I tell the potential members?  Let me hold onto your money until a deal comes?  Sorry...maybe that's a stupid question!

Any insight would be appreciated!

Kyle

Hey BP!

I'm looking to purchase my first VRBO property and ideally looking in the Siesta Key Beach area in Florida.  I used the "Find An Agent" button, but the only two agents I found worked strictly in the Tampa Bay area, so I struck  out there.

Does anyone know of a good realtor that specializes in VRBO in Siesta Key FL ?  Any help would be greatly appreciated!

Kyle

Hey guys!

So I'm looking to acquire a seller financed large commercial property.  Single occupant...but is a solid tenant (national flagship bank) and has been there for 10 years and custom built out this large facility to meet their needs.  They have 4 years left on their new 5 year lease (Triple Net) with option to extend for another 5 years.

I can acquire it for $5.8 Million and seller is willing to finance it for zero down.  My concern is Net Cash Flow after everything is said and done is $20k a year.  Which seems very tight for a 5.8 Million property.  This is my first large deal and I will have a partner or two on it.  I think the cap rate is around 6% for it and cap rates for this kinda building is around 5.5% so there is a small amount of equity built in.  

Building was built in the early 2000's so it's not terribly old.  

After 5 years, with debt pay down and appreciation it will be worth around 6.35 Million so it would get some good equity in it.  

Feel free to poke holes in this at your leisure.  I want to get into bigger deals like this...but can't afford for this to go badly either!

Kyle

To BP Members-

I've tried to go through my local bank where my properties are at to refinance all my rental properties (9 properties in total) and get them on a 30 year fixed rate.

I was turned down, though, not because they value or LTV ratio wasn't good, but since I owned over 4 rental properties, it was an automatic rejection? This is a Federal Home Loan Bank (secondary market) guideline I guess?

I've asked other local banks in the area if they offer that product, and nobody does at least in this area.  

What banks have you guys gone with to get long term, fixed rate financing?  Also...how was the process and was the closing costs astronomical?

Thanks!

Kyle

@Justin Hayman

Hey Justin!

We are building a 40 room, limited service style hotel.  Population in the town I'm building is 4000 people, so smaller operation.  I have had 3 total bids all come in around that $4M mark, plus I've had confirmation from the franchise that the $4M is typical cost to build that type of hotel.

Thanks for the input!

Kyle

@Dushyant Ravi

I apologize for possibly another stupid question.  I have several apartments and rental houses...but I've never heard of the term "conduit debt".  I'm trying to search online....but can you explain...in easy terms....what conduit debt is?

Thanks!

@Ben Patel 

I had a feasibility study done with a 10 year pro-forma as well.  We are hoping to break even in the first 1-2 years.  This was confirmed by our hotel management company that specializes in managing our flagship (GrandStay) in towns similar to ours.

IF there is a loss, that loss is split by your ownership percentage in the hotel.  If there is a $50,000 loss and you're a 10% owner, you have to pay $5,000.  

I have looked into buying current hotels, but this is a sweet deal in that we are planning on building in conjunction with a new hospital being built as well on the same campus.  

I have had 3 different hotel contractors give me the same estimate at around $4 million to build (all-in) which was also confirmed by the franchise on typical cost for hotels of that size.

If you're interested in getting into it, hit me up on a personal message and you can invest in this one!

@Michael Ealy When you say "they get an interest payment - say 6% on their money and on top of that they get 50-70% equity profit share"  Does that mean they get 50-70% of the overall profit the hotel generates?

The president of the franchise stated that one way the developer can get some skin in the game is that they charge 3-5% of the total project cost as a developer's fee.  In your scenario, that fee would be waived in exchange for 30% ownership and signing the personal guarantee correct?

Thanks!

@Jay Sloan:  Thanks for replying Jay! I do not have any experience operating hotels, but I have signed a management agreement with a professional hotel management company that already runs several hotels in my area of the same flagship/brand.  The bank has already viewed my net worth and have agreed that it is sufficient enough.  My challenge is I'm dealing with a lot of local "newbie" type investors that have limited experience with a large investment like hotels.

@Michael Ealy:  Thanks for that advice!  I'll pencil that out and see how it all flows from there. 

1.  Regarding qualifications:  The local bank that I already have a very solid relationship with in that they have a bunch of my other loans have already agreed to just me being the sole guarantor, even though I do not have a net worth of 4 million, as long as it goes through SBA.

2.  Zero rooms under management or owned.  I do, though, have a hotel management company under contract that manages other hotels in the area under the same flagship/brand.

3.  See #2.

@Greg Dickerson  Thanks for the reply Greg!  I do have a securities attorney looking over everything on that end.  And I apologize if this is a stupid question, but what is a "KP" to guaranty the loan?  I know what LP (limited partner) is...but KP might be some new lingo.

The one and only benefit in my eyes for the SBA loan is that it will give me a fixed rate over 20 years....all the other banks I've communicated with will not do a fixed rate unless it's through the SBA so it might be a necessary beast I have to deal with.