All Forum Posts by: Mitchell Jah

@Brent Coombs

Thanks for that example but that is a hard comp to use as the zoning has made the dwelling units obsolete. But, i see your point, I'll into comps for the house price. 

The RE is worth $480k and the business price is worth $80k. Partners will pull a SBA Loan allowing them to  combine the cost. They also threw in some closing costs, legal fees, etc. giving a grand total of $630k. 

Have you ever been in a deal where the one of the Partners did not put any financial equity into a deal but was rewarded with 'sweat equity'? That is my only guess why they do not have any skin in the game... Please share some of your experiences with these Partners if you have any. 

Each room is collecting just around $2,815 per month (no way you can get that much for 1 room in a 6 bedroom if renting regularly) with a Gross Schedule Income of around $200k and a Annual NOI of $98,500. I calculated my ROI and it would be just around 17.5%

Thanks so much for the look over Brent!

As a passive investor in a Single-Family Residence converted to Senior-Assisted Living, how much is 'sweat equity' worth in these types of deals? I understand management and insurance is at a higher cost than normal because it requires special licensing and higher quality management. With that said, 'Managing Partners' put the deal together, will manage the property and run the business. 'Managing Partners' are selling 50% equity for $182,000, equating, $91,000 as 'sweat equity' in the deal. Does this make sense as a passive investor?

Thanks for all the great advice in advance everyone!

@Michael S.

So how long have you been working with BiggerPockets and what is your role with the company?

@Chris Seveney Thanks for replying and I will try to divulge as much information as possible.

The property area is in Loma Linda, CA  a city in the County of San Bernardino. The deal is a Single Family Residence converted to a Senior-Assisted Living property. The property and business has been operating for 12 years. The property is 100% leased with 6-units. Managing Partners are giving 50% equity in cash flow and appreciation for $182,000 which goes directly to the SBA Loan down payment.  Because of lending reasons 'Partners' need to split the 50% equity to at least 3 passive investors. The 'Partners' are effectively measuring 'Sweat Equity' at 50%. They currently claim to have a annual return of 18.3%. There are no built-in rent escalations but claim to have low rents compared to comps where they can raise rents about 2% annually.

I like this investment because its in-place already and its passive. I would really like this deal if the 'Managing Partners' had some experience but its their first project in Senior-Assisted Living. Another concern I had was since the 'Managing Partners' had 'no skin in the game' if the deal was making negative cash flow at year-3 they could decided to call it quits and effectively wiping out the passive investors' principal. Although, I only foresee, demand going up as many 'Baby Boomers' are coming of age and moving into Senior-Assisted Living.

My number one goal for the investment is to learn how to be a investor myself and number two is of course is to make a solid investment. Do you think being a passive investor gives you some exposure to deal-making learning the day-to-day operations of a 'Landlord' or 'Owner'.

Hope the information is sufficient, if not please let me know what else is needed to do some proper underwriting. 

Thanks @Michael S.

As a first time investor what are the pros and cons of investing as a passive equity partner? Off the top of my head, I can see not having no controlling factor could be a problem. What else if someone can shed some light :D. 

Thanks in advance!

Hi Everyone, 

My name is Mitchell and I have been listening to Josh and Branden for about the last 6 months now and finally decided to check out this website. I have also been a commercial broker for about 1.5-years now. I assist investors grow their wealth  and finally wised up and would like to become one of those wealthy investors.