All Forum Posts by: Nick B.

City of Fort Worth has a big improvement plan for the area: 
http://www.fortworthbusiness.com/news/council-report-stop-six-renovation-plan-moves-forward/article_26b19ace-f547-11e9-a7d3-fb91fd71eac8.html

Never ever use % for expenses except for PM fee (% of collected rents). Every other expense is a dollar amount that does not depend on the rent.

Vacancy is not an expense.

Sponsor's money in the deal is only one piece of a puzzle. I need to see the entire deal structure to make a decision. However, if a sponsor invests a significant portion of equity (e.g. 20%) I would feel more inclined to invest with them. 

Jeff, may preference is for any kind of a deal: value add, yield, anything in between. 

Depending on which exemption you use:

For 506c, you can advertise publicly but may only accept accredited investors verified by 3rd party.

For 506b, you may only solicit people you already know and have substantial relationships with. 35 of them may not be accredited but have to be "sophisticated" investors.

However, if you already have a property under contract but don't have investors yet, you are in a very risky spot considering that this is your first deal.

I am not a lawyer, and you need to seek legal advice for the details of SEC exemptions and capital raising strategies.

Both

As a passive investor, I like #3 (80/20 or 85/15 split). 

Today is your lucky day @Derek Gold: https://www.meetup.com/DFW-REI...

This is a general purpose group (SFH mostly) and they meet today.

@Matthew Nicklin,

This is quite common practice among members of some guru programs. I don't invest in such deals because usually they have multiple sponsors (6 was the highest number I've seen) and only one or two of those sponsors have some experience. Others are money raisers who like to boast about the number of units they "own". More often than not, the "experience" partner is a guru himself but the real operator is his rookie student. That's a recipe for disaster in my opinion. Too many cooks in a kitchen and the main chef may not even be there as he has too many kitchens to attend.

Nick

@Michael Randle,

I'd like to reiterate this again: Expenses are dollars and not percentages of rent (except for PM fee). Why? Because they do not depend on rents. If you pay $200/unit for general admin and the rent is $700, what do you think you would pay if rent doubles? The same $200. The same logic applies to any other category: If it costs $300/unit for a make-ready, it does not matter if that unit rents for $600 or $800 or $1200.

You are right saying that these numbers are market and property class specific (some more than the other). So, where do you get them from? For a high level estimate, NAA survey is good enough. It has a breakdown by region, category, unit, sq foot, property class, etc. For a detailed estimate, ask a few management companies that manage comparable properties. They'll give you much closer to reality numbers.

"Make-ready" is what happens after a tenant moves out but before a new one moves in. It is mostly cleaning and cosmetic repairs.

"Contract services" are something that is outsourced to 3rd parties. E.g. pest control, landscaping, trash removal to name a few.

Neither one of these categories are CapEx. An example of CapEx would be a new A/C or a new roof - something permanent with a long lifespan.