All Forum Posts by: Phil Morgan

@Christopher Phillips  Thank you for the reply, that makes sense. I didn't realize it was that much more involved than a normal residential appraisal.

What should I expect to pay for an appraisal on an 8 unit property?? The bank said it could be anywhere from $1500-$4000. Weird that the bank can't tell me how much it will be until it comes back but $4k seems super high. Thoughts?? 

Welcome!  Make sure you and your friend have a written agreement before you start buying properties.  Assuming you both are on the same page can ruin a friendship real quick.  Get a partnership agreement or something similar and detail each persons responsibilities.  Good Luck!

The best book I have read so far about apartment and commercial investing is "crushing it in apartments and commercial real estate" By Brian Murray.  I think I have listened to it 4 times already, its full of great stuff and I take away something new every time.

@Samuel Lynch  I was skeptical at first as well but once I bought it and watched a few of his short training videos I wished I had done it a year ago.  I thought about doing his training and talked to a couple people on here that completed it and were happy but I just couldn't justify the money at this point.  Most of his stuff is based on finding money and that's not an issue I am having at the moment so I didn't think I would get the full benefit from his training.  

BUT the deal analyzer is worth every penny I spent on it.  If you get it I do not think you will regret it.

@Neil Goradia , @Jeff Greenberg

Thanks for the advice.  We are meeting with a real estate attorney this week to try and get it all down on paper.  I do agree that the split could change based on the property we purchase.

Property #1 is an 8 unit we will be doing a BRRR on. He will supply the 25% down and the renovation will be paid for with the cash flow. We have a 2 year plan to refi and pull his cash out. We have agreed not to take any profits from the property during this time to keep funding the reno. I will still be taking my management fee and be the acting GC during the project. Question is, should he expect to see some kind of return on his money for those 2 years? Or does he park it for 2 years and get 50% off the cash flow once we refi and he has his capital back. This is what I am struggling with.

Deal #2 is a 12 unit that is cash flowing now and with minor work can see significant rent increases, at least $100 per unit. Again he will be putting down the 25% needed but none of the work needs done right away, most will be done while turning a unit which will be paid for with our reserve account.  Since this is a more stable deal would be get more of this?  Is there any sort of standard here or is every deal what the partners agree on?

Deal #3 could be 22 mix use units. 4 commercial store fronts and 18 apartments.  All units are way under priced so there is a big upside but the commercial tenants are leased through 2020 and 2022 so there would be no movement for a few years.  Cash flow as it stands is not outstanding for such a large building but the upside potential is very promising.  The apartments need minor improvements to command at least $100-$150 raise in rent once the current leases are up.

Like I said before I just want it to be fair for everyone. I want my partner to feel he is getting a fair return on his investment as the properties are being held. The plan for the smaller properties would be to 1031 out of them down the road to help fund larger deals.  At this point we hope to make a decent profit based on the value we have added.

I bought it for $99 and use it on every deal.  Huge help when you need to dig a little deeper into expenses.  If you are looking at multi family properties you will not regret your purchase. 

I would be looking for a 2-4 unit building that you can live in and rent the rest.  Not sure what the market prices are around you but you could buy 3 or 4 nice duplexes in my area with that kind of start up cash (with leverage).  This will be the best way to start building your portfolio and also potentially living for free. 

I am in a pretty good situation but not sure exactly how the paperwork should work.  I have a partner that has money and is willing to put the full 25% down on properties that I find for a share of the deal.  He is also willing to put out the money for any up front repairs we need to make.  My question is how does this look on paper?  I will be finding and negotiating the deals as well as being the property manager.  We have already agreed that I will be taking a management fee.  He will be bringing the money his contacts with lending, lawyers and other potential partners when we start syndicating. Who has had a partnership like this and how did you structure it? We aren't looking at 200 unit complexes yet so the cash flow isn't huge.  Right now we are looking at some 20-30 unit buildings and just got a 8 and 12 unit under contract.  I know how everything works for a flip not not too sure how that translates to a buy and hold deal. I am just looking for an example of how you have split cash flow and equity with your partner.  I know the generic "just split it 50/50" but its not THAT easy.  He is putting down a nice chuck of change and I am just making sure that he is getting a decent return on his money so it's fair for both of us.  We are looking to grow and invest in larger multi family and commercial properties so we need to get this all ironed out now.

Thanks 

Edit: We will be forming an S corp and then buying each property in it's own LLC. I own a smaller multi family properties on my own but took on the partner to buy bigger deals. I am not jumping into this blind, I do have some experience.

I do not invest in cities with POS inspections for many reasons, this being an obvious one.  It's one of those things that isn't going to change so you either accept it and play by the rules or you shop in one of the many areas that don't have these inspections.  If it's that big of an issue for you than look elsewhere, you have lots of options.