All Forum Posts by: Rob Barry

@Joe Villeneuve @Michael Bishop @Brian Burke   - Thanks so much for weighing in. So it doesn't look like charging a % of invested assets on top of a % of the profits is standard. But considering the average returns from the last seven deals 40% (pre split) in 5 months, I think I may give it a closer look.

Do any of you have experience investing with international entities? I know in the U.S., recourse is as straightforward as enforcing the contract language upon a legal entity. In Spain, I'm out of my element. Any pitfalls to watch out for?

Can someone provide a brief outline of a typical structure for deals where one experienced managing partner puts together a deal and takes on a number of investor partners?

I ask because I came across a firm offering deals like this:

• Purchase, rehab and flip a distressed property, timeline 6-18 months.
• Minimum Investment $100,000
• Above $500,000 and an investor can appoint a member to the management board
• Minimum asset price $1,000,000
• Management Fee: 2.5% of invested funds
• Management invests 10% alongside investors
• Developer invests 10% alongside investors
• Success fee of 50% on returns above 8%

My main question is whether the 50% success fee on top of the management fee is highway robbery, or pretty standard on larger deals averaging 30%+ in such short timeframes?

Is there a standard, by-the-book formula most use?

I bought two SFRs in the Atlanta suburbs so far this year in cash. looking for a mortgage broker to get my equity out of these and help finance future acquisitions in that area. 

Unfortunately, due to my wife's Big Four job, Wells Fargo and Chase are out. I didn't like dealing with AIM Loan when I spoke with them and Sun Trust wanted 3.5 points for 4% on a 30 year fixed. 

Anybody know a guy?

@Jonathan Twombly 

Thanks for your reply. I just listened to your BP interview as well. I can commiserate with your having bought one or two smaller properties and then wanting to go right for something quite large. I'm just closing on my second sub $100k SFH and realizing that, at this rate, it'll take quite a long time to generate meaningful income from acquired R.E. assets.

At the moment, I'm liquidating my position in my business to free up capital for investing in multis (and starting a new biz) and trying to determine how large I want to go with the first bigger deal. I'd been thinking to find a partner moreso for the experience/street cred than for getting the largest property possible. So let me put two questions to you.

1) Let's assume you were just starting out in multis again and had, say, $1m liquid and a few well-heeled friends looking to add R.E. positions to their portfolio. What sorts of assets would you go after, and would you seek to own/control one outright, or have leading positions in 2-3?

2) One of the big takeaways from your early experience is "only partner if the partnership is ideal." It makes sense why you'd rather have full control, given the time wasted lessons learned with floundering deals in your first partnership. But how else would you have confidently attacked such intimidating deals as an outsider without a partner who had at least some experience and credibility in the marketplace?

Kind thanks for your sage advice.

If you could go back in time and tell a younger you one or two lessons about what to do with that first large multi, what would they be? So much of the advice out there focuses on finding and closing deals. But what are the important lessons to learn in holding and managing a 100+door apartment development? Thanks in advance.

@Account Closed - Sage advice. And really I'm only looking at properties of this size because that's what I could hope to buy without partnering/raising money. I've got a good head for business and operations, but not much experience with partnering and structured deals. It does seem as you suggest, under triple-digit-doors, the numbers put management as a massive profit sink. I suppose then, there aren't a lot of property management companies that can just add a stack of 30 units to their normal ebb and flow...? I'll check out Michael Blank's podcast and possibly reach out. Thanks!

I'm looking to learn the ropes of large multi-family complexes with a goal to acquire one with 30 doors in the next few years. So I wanted to asked more experienced investors what they look for in a large multi deal.

Apart from buying in a strong and growing market, what do you look for in terms of cap rate, property layout, types of value ads etc?

I've heard people throw around a target 10% cap for large multis. Is that reasonable or rare? Thanks in advance.

@Jonathan Twombly - Very good advice. Thanks for that!

I am no expert here, but I am an American living internationally full time, going on my third year.

My assumption would be that if you kept one unit open with your furniture in there and legitimately treated it as your primary U.S. residence, you could use that to get an owner-occupied rate. I hear banks sometimes check up on these things.

But is shaving a point off your mortgage worth jeopardizing your FEIE by establishing a tax domicile? I use the bona-fide resident test to write off a boatload of tax ever year, and if I had a primary residence deeded to me with a full paper trail to boot, I would fear an IRS tax surprise in the mail one day. This may be different with a physical presence test, as you can't dispute meticulously organized airfare records that prove you were out of the country at least 330 days. But then, do you want to spend your one domestic month setting up a property in the U.S. to shave a point off your mortgage? I suspect renting the fourth unit would be more profitable than leaving it vacant to get a slightly better rate. Just thinking out loud here, but I really would recommend running this by a qualified accountant. 

With my first SFH rehabbed and rented, I'm seeking delayed financing. I've already learned it pays to shop around, as I've been quoted between 4% and 4.85% for a 30-year fixed.

So far, Aimloan has the best rate at 4%, but I feel like the $4,164.52 closing cost has to be high. They have it all broken out in their live rates table:

What I'm wondering is, what is it that a lender uses to justify the higher closing costs associated with lower rates and, of course, is one able to negotiate that down?

Also might be helpful if anyone has a bearing on how working with Aimloan is in the scheme of things. Thanks!