All Forum Posts by: Roni E.

Originally posted by @LaRhonda M:

What are you thoughts of investing passively through sydications and how exactly do they work, or how does the investor profit?

I have a potential deal for a 80 unit apartment complex.. $25,000 min investment... 10% cash on cash (Quarterly payout)... 18-24 month hold period...minimum return at exit 25%.... target 2X return.

Is this a normal/good syndication deal?? Is the money primarily being made off of my initial invest, not necessarily property performance? what happens after the 2 years are we no longer invested? Or is does the CashFlow continue?

Hello this is Not Legal or Tax advise so I would speak to both before making a decision. I will Zig while other have Zagged here. I would say the LLC is better as it is not held in your personal name. Also for estate planning again speak with an attorney you could sign an amendment ahead of time or create a para upon demise of XYZ(wishing you health & a very long period before that would happen) that the LLC membership would transfer to ______ blank person. Also, the LLC can give you charging lien order protection. 
I would speak with your CPA also of how you can get classified in the IRS eyes as a Real Estate Professional.
Originally posted by @Debbie Hannappel:

When looking at being a individual passive investor in a Multifamily syndication, is it best to become an LLC yourself or stay as a individual investor ?

Does anyone know if as an individual passive investor in Multifamily syndications,  your not married but have a significate other, let say you pass away how does that person become a beneficiary?

Does anyone know a good CPA in the Phoenix/Scottsdale, AZ area that handles these type of investments K1, if the investment is from out of state?

Thanks

Originally posted by @Ellie Perlman:

Overbidding is the opposite of being a conservative investor. It happens when you buy above the market rate, compared to similar properties in the same general area. Another telltale sign of overbidding is when you purchase a property at a higher cap rate than market cap rates.

Capitalization rates (which are calculated as net operating income divided by purchase price) show what your return would be if you paid cash for the property. The lower the cap rate, the higher the price you’ll pay for the property. Higher cap rates usually lead to higher returns, but a cap rate that is too high can be an indicator of risk in the investment. The national cap rate for multifamily is 5%.

Here’s something to think about: You may be overbidding on a property if you ignore signs that you should be more cautious in your investment approach. This can happen when an investor is new and inexperienced, and only sees the upside to a real estate deal while ignoring inherent risks.

A Closer Look At The Current Cycle

Has the multifamily cycle peaked? Some experts think it has. But there is still a strong demand for multifamily properties, along with a shortage of quality properties available for purchase. The factors that pushed multifamily property prices higher and caused investors to start overbidding are still in place. These factors include more retiring baby boomers electing to rent rather than purchase new homes, and millennials who are also choosing to rent rather than buy single-family homes.

So Why Do We Still Witness Overbidding?

Throughout my career in real estate, I’ve witnessed several key reasons why investors still overbid at this late stage of the cycle. Foreign investors are still bidding on U.S. properties, which is helping to drive up the price on multifamily properties, as well as contribute to overbidding. For foreign investors, making 3% cash-on-cash is better than 0.5% in their home countries. Institutional investors are also driving up prices by purchasing properties at higher prices, not only in the primary markets that they’re used to, like New York, Los Angeles and Chicago, but in secondary markets as well. They mainly make money on fees, and they have the power to lower their investors' expectations when it comes to returns. Hence, they are able to overbid.

Interest rates are at historic lows, which makes financing more attractive, and that fact allows investors to offer higher prices. In addition, novice investors are overbidding simply because they want to own real estate, and they are willing to do whatever it takes to acquire properties.

Another factor driving prices is the 1031 exchange. This tax-deferred exchange permits a seller to trade their asset for a similar one and defer their capital gains tax until the sale of the next asset — or even further down the line. So sellers are under pressure to acquire new properties and will do whatever is necessary to buy one, including overbidding, so they won’t have to pay high tax on capital gains.

Lastly, many investors are overly optimistic, thinking that higher rent premiums will help to justify the price they’re willing to pay for the property. That’s simply not the case. Many investors and apartment owners will attest to the fact that when rents are raised beyond the market average, tenants will elect to move.

Hello, as you are analyst aka excel guru, lol. I would look at buying a Class B 4 plex move the family into one of the units and other 3 pay for the mortgage, costs and bit of cash flow. Then in Y3(year going to PA) sell to an investor. As always triple check the numbers. The other options is a syndication. 

Originally posted by @Patrick Ryan:

Good morning!

I’m looking to get started in real estate investment. My initial idea was to buy a small multifamily, renovate the units, then sell it in Denver.

I have 2 young kids (2 under 2) and a full-time job as a commercial multifamily analyst. House hacking is out, and I don’t have the time to add the job of property manager.

I’m planning on relocating with my family to Philadelphia in 2023 as well.

Any advice?

Now I assume you will be doing a cost seg. so you can get the bonus and accelerated depreciation. What we think is the best way is have all depreciation flow to Investors until capital account till zero. (including GP/sponsor/manager if invested also). The goal is to take care of your investors. 


Originally posted by @Dave Holman:

I'm structuring a new syndication and two CPAs disagree. One thinks that General Partners can't take depreciation on their carried interest (until all Limited Partner capital accounts go negative), only on actual cash contributed and the other thinks that allocating depreciation based on overall sponsor ownership (vs cash contributed) is correct. Who is right? 

Originally posted by @David White:

@Roni Elias Gotcha. When do you create these different LLC's for each deal? After you have identified a property? After you receive a verbal commitment from the investor? After closing so you can then transfer the property into it?

Originally posted by @Cole Agner:

Any and all suggestions are welcome, but please don't be an asshat and troll my post, because I'm looking for some real advice...

I'm 27, live in Tampa, FL, have a great corporate paying job that earns about $100k/year, and would like to passively earn a total of $200k by year 15 (Year 1 is 2021) in order to put a down payment on a dream home. I did some really quick (and probably bad) math, and estimated that if I found 1 investment vehicle every 2 years and received a positive cash flow of $3600/year on each new investment, then I'd come out where I'd like to be in between years 13 & 14 while owning 7 properties and passively making $25k/year.

My strategy needs A TON of tweaking, but my initial thoughts are to invest in a multifamily house with my buddy who owns 4 properties so I can get my feet wet, learn the basics, and then branch out to other multifamily houses over the next 5 years. Then, I'd start considering small & large apartments around year 10. The idea is to buy and hold all of these.

Now please be honest with me. Is this realistic? One of my biggest things today is that I want these investments to require as little oversight as possible, at least for the forseeable future, so I that can continue building upon my career without letting this hinder my professional goals, which are fairly ambitious. So in hindsight, if any of this looks screwed from the get-go, then I'm all ears to suggestions and providing more information if needed.

Thanks a ton