All Forum Posts by: Percy N.

@Randy Smith good summary on tracking the distributions. If you could share that spreadsheet template, I am sure some of the LP investors would appreciate it even more.

Curious to know what the average cash on cash distribution % is for the various projects. With interest rates rising, I can see some projects being more conservative with their distributions.

We make monthly or quarterly distributions based on the project and business plan. For our MultiFamily Fund, we make quarterly distributions since it seems to have the right balance between frequency and admin overhead/costs.

@Calvin Penn most areas follow the HUD Fair Market Rents that are published for the year.

This is what they published for 2023 - 

FY 2023 Final Fair Market Rents Documentation System — Select Geography (huduser.gov)

@Chad King, also check the flood zone and if the property is in a floodzone you will have to deal with FEMA guidelines too and may only be able to open permits totaling less than 50% of the building's appraised value, otherwise will have to raise the building, etc.

@Kyla Nicole Nickerson Jones, assuming these will be investment properties once built? Are you then looking to sell them or hang on?

One option you can look into is partnering with an experienced developer where your contribution to the partnership would be the property.

Once completed the partnership would sell the property and the investors would split the profits (60/40?) with the sponsors.

@Chad King,  we have not converted a school but did convert a hotel to multifamily.

A couple of items to keep in mind:

How old is the school? 

What would need to be remediated (asbestos, lead paint, etc)?

Any changes to electrical, plumbing, etc?

Structural changes?

Code upgrades like fire or electrical?

What condition are the main water and sewer lines in?

What amenities will the residents need?

The above items could have a significant impact on the cost of the project.

@Amby Bhagtani some of it could be dependent on the size asset and whether you are planning to buy it by yourself or with partners, so some additional context would help.

@Tony S., a few years ago we were under contract to purchase a 124 unit complex when there was a fire while we were under the DD period and 12 units were damaged to varying degrees.

We still went ahead and closed and it turned out OK though had its headaches as well.

Couple key things to consider:

- Will the seller's insurance company let him assign the claim to you? Many will not, so you may need to negotiate an escrow with the seller to cover the repairs as they get reimbursed from the insurance.

- Will the construction be done in time and units leased with loss of rent coverage?

- Does the policy have code upgrade coverage?

- Insurance will claim some amount of depreciation that is not covered, etc so make sure you are getting all your costs covered from the seller.

- Permitting and COs can take longer than expected so who will cover that expense?

- Get multiple quotes from GCs and Public adjusters and go with the higher ones to be on the safe side. 

- You have the leverage to walk now, so negotiate what you want, all the seller can do is say no and you have the deal you currently have. 

- Don't let the tax tail wag the dog - make sure it is a good deal first, tax benefits will be secondary. 

Congratulations @Gregory McKinley !

What is the business plan for the management of the property?

I always found it challenging to have the underwriting on anything less than say 75-100 units justify a dedicated leasing and maintenance person. 

Congratz @Ivan Barratt

We love markets with strong fundamentals that "fly below the radar" and we have a few closings before the end of the year in our Multifamily Fund II in the Huntsville, AL market.

Assuming you use your own property management function for your assets in Des Moines, IA like we do in Huntsville?

GP = General Partner (or sponsor)

LP = Limited Partner (or passive investor)