All Forum Posts by: Nick B.

You don't need to. Just use the name of one partner and "and/or assigns" phrase. If LOI is accepted you can assign it to to a newly created entity

70% is the loan ($7M)
The buyer brings in another $2M cash
The seller brings $1M of equity he already has in the property.

Yes, this equity is essentially a second mortgage but under a different name. The terms of this equity should be included in PSA. The buyer should treat it as a second mortgage in terms of payments and return of principal. Buyer's operating agreement should have provisions of paying preferred interest first and paying off preferred equity balance at certain time. If the buyer defaults, the pref equity holder should be able to regain control of the property or force the buyer to pay.

This is how some institutional investors get into syndicated deals: they provide second mortgage but call it "preferred equity" with terms similar to those if a mortgage.

@Rich Weese
I don't think Fannie or Freddie allow second mortgages. However, you can ask the buyer to give you preferred equity instead of the second position loan.

For example:

70% loan
10% preferred equity
20% common equity

This preferred equity would receive fixed "dividend" payment (e.g. 10%) and would be bought at the face value by the buyer at the later time (e.g. 2-3 years).

CoC is your net income: rent - operating expenses - debt payments

Capital gain is the difference between your basis (purchase price + closing costs + capex) and your terminal value (sales price - cost of sale).

CoC is what you get paid relative to the money invested. ROI is your total profit (or loss) that includes CoC and capital gain (or loss). ROI can only be calculated upon the sale of the investment.

@Joe Splitrock, my income loss (no distributions) is real. It's not ALL my income but an important portion of it. By your logic people with savings that are enough to live on for, say, 6 months should not get $1200 stimulus payments but they do.

@Greg O'Brien, I think the last item from the list applies to everyone. Hence, in my humble opinion, everyone is eligible for this provision. 

@Joe Splitrock, thank you for the article but it's just a repetition of what I already read elsewhere. I still think there is plenty of grey area as "adverse financial consequences" are not clearly defined.

Like I mentioned before, my income got reduced because I no longer receive those distributions and the likelihood of the large capital loss has increased dramatically. How is this not an "adverse financial consequence"?

@Carl Fischer, the reason I want to withdraw money from IRA/401K is to be able to invest it more efficiently. Depreciation is a lot better tax deferral mechanism than IRA and long term capital gain tax rates are lower than ordinary income rates applied to IRA withdrawals. Oh, and I can use the income from the assets right now vs. waiting for 59.5 age.

@Michael Plaks,

Thank you for your answer.

The way I read the law (I am not a lawyer) is that the amount of withdrawal does not have to correlate with the amount of economic damage. The damage is not yet fully known. E.g., some of those apartments that stopped paying may end up in foreclosure and I could lose all money invested in them. Hence my potential damage may be way above $100K limit and that qualifies me for the withdrawal. 
Thoughts?