All Forum Posts by: Todd Peoples

 Don, this one makes a lot of sense to me and I think it's the direction I'll go. 

Thanks for all the suggestions.  Very helpful.  

Hey all,

I have a good relationship with a non-profit that owns a beautiful several hundred acre ranch in the Texas Hill Country.  Unfortunately, a lot of the buildings and systems need repairs and are pretty run down and they don't have the resources or expertise to manage the process.  They have a handful of buildings on site. 

I'd like to partner with them to restore the property and rent it out for events, weddings, STR, etc. and potentially even sell off half the property for a high end private ranch. They've asked me to propose a partnership structure. The property is probably worth $10M - $15M if they just sold it, but they'd rather stay in the deal so they can use it for the families they serve as well as their own employees and events.

I'm thinking they contribute the land to a partnership where we agree to ownership %'s and I am responsible for sourcing the funds to restore the property and managing the process.  Thoughts?  I'd love other creative ideas around how to best structure a deal like this.  

This article was in the WSJ today and is relevant to this discussion.  It contradicts a lot of what has been said on this thread, although it only cites a few markets: A Bargain with the Devil - Bill Comes Due for Overextended AirBnB Hosts

Thanks @Nathan Gesner I haven't heard of Obligo but will look into it.  The good thing about the product I'm considering investing in is it's a true insurance policy.  

Great point @Ronald Rohde.  The product is actually underwritten and backed by Euler Hermes, which has underwritten billions in policies over the past 130+ years.  I agree, it's very important that the financial risk is not tied to a startup

Thanks @Courtney Duong!  Will look forward to his response if he chimes in. I agree, the additional coverage is a huge benefit. Can get 3-5x monthly rent coverage vs 1 month rent coverage with a traditional cash security deposit.  

I'm considering investing in a company that provides a commercial deposit insurance product that replaces lease deposits for office and retail tenants.   This allows businesses the ability to access and invest critical liquidity while providing landlords with enhanced coverage against defaults. Basically, instead of a tenant putting down a deposit, they agree to an insurance policy with a monthly premium rolled into their rent. The liability coverage for the LL is also typically higher than a cash security deposit. The goal is to increase leasing volume while also increasing the security for the LL and reducing leasing friction for both tenant and LL.

Would this be useful for you and your properties?  Any potential downsides you can think of?

Any feedback you can provide, positives and negative, will be very helpful.  Thank you!

Can you post your economics on the deal?  Congrats!

Wanted to provide an update. 

 I have an architect drawing up a layout for 4 townhouses on the property.  May try to do five 2-bedroom townhomes instead of a mix of 2 and 3 bedrooms, but it will just depend on the layout. Still, at an ask price of $40/sq ft for the land, I'm not sure the deal will be worth pursuing.  It will come down to development costs.  Next step will be to determine hard and soft costs and the max I can pay for the property if I want to achieve a 20% return.

Thanks everyone. You all have provided excellent advice in this thread.

Everything looks good at this point except for price...  With dimensions of 98x125 and an ask price of $490,000 ($40/sqft), it will be difficult to make a profit building townhomes on this site. Townhome comps are a little under $300k for this area.  The site is probably not big enough for an apartment complex but, may be good for a small office building since the height restriction is 100 ft. Will need determine what the economics on an office building look like.