All Forum Posts by: Shafi Noss

There is a company that will buy pre-IPO equity. I believe equity financing is very low leverage so that is a way to access a lot more of it. More relevant to the non-FAANG people who might read this later. 

You and your tech friends could pool funds together and pool negotiating power, offering to fund a large part or all of a a deal in exchange for a better deal. It would require a lot of coordination and a unified will from you guys, that's still just using cash though. I've done this on my projects before. 

As high net worth/high income people, there are tons of ways to arbitrage loans similar to the stock arbitrage. You could get a personal loan and arbitrage, life insurance and arbitrage, probably other vehicles too that I'm not thinking of. 

@John P. I'll PM you a link to a description of the restrictions. 

@John P.

The counterparties are the other owners who have the tenancy in common with you. For example, suppose there are 9 investors and 1 manager. And the manager and eight investors decide it's time to refinance, but one investor doesn't want to. In that case, the refinance doesn't happen. If all the investors but one want to sell, then the property does not get put up for sale. 

Even if all the members agree, it's possible that if one is just out on vacation, then the unanimous decision to do literally anything wouldn't be met and the project would be paralyzed. 

So the counterparty risk is that just one investor doesn't agree to the overall plan and then the project can't function.  

@John P.

Hey John, to my understanding the main reason TICs are not common for syndication 1031s is because there must be unanimous consent between all investors to sell, refinance, leasing, management hiring, and basically all executive decisions. 

Also, sponsor compensation can only come from a percentage of rents or sale price, can't be based on investor returns, and a few other inconvenient details. 

So basically good incentive structures are not allowed and there is gigantic counterparty risk. 

I definitely miss the ability to allow 1031 investors into my projects, I think I have some good ones. But I believe there is an alternate repeatable tax strategy which involves snowballing your passive write-offs between syndications, although that doesn't meld with 1031s. 

Yeah super good input from @Jay Hinrichs. I have made some bridge loans recently in TX and am usually pretty happy to just charge an extension fee and keep accruing interest as long as the borrower has a legitimate plan. 

It sounds like you are doing great setting the groundwork for yourself. Here are a few thoughts that might be useful. 

There are three ways to engage with real estate. You can be a passive investor where you have capital and decide where to put it, an active investors where you put effort into putting together and executing deals like wholesalers flippers and developers, or a service provider where you provide a professional service like a loan officer, appraiser, lawyer, RE agent etc. The lines between these roles are not perfectly sharp but this might be a useful way to orient yourself on how you want to do real estate. It sounds to me like you are most interested in active investing.

Active real estate investing has an apprenticeship model, where you can get a helping hand from people by showing up and working hard. When people see that they love it and it sounds like you are doing that already. If you start engaging with people you may eventually get a lucky day and find your first foothold. 

I had a good experience working with Nicole Hatzenbuehler and Ashlee Hutson with the Moats Team. 

I am building a duplex and a SF home in Austin right now ARV appraised at 3.3M combined.

When you say developers do you mean GCs? You should be able to pin that number down more precisely by specifying the quality of the finishes and square footage of the home. Have you worked with an architect to estimate what the zoning will allow you to build?

Total costs will be more than land + construction + holding costs. Remember that you will need to pay architects, engineers, closing costs, permitting fees, you may need an environmental report and other so called soft costs which usually need to be paid in cash upfront before financing. It is also a good idea to budget an extra 10% as a contingency, your lender will usually finance this so that is good. 

If you build yourself you can spend much less money than buying an equivalent building, but in exchange you take on the market risk and execution risk. Is there an opportunity cost with your money? Developing can be very profitable but also very risky. I think just decide whether it sounds worth it. If it doesn't don't waste time and find something you're happier with, if it does keep taking the next step to get a clearer picture of what would be involved. 

My thoughts. 

The first step is to check the contract like Charlier recommended. 

If it turns out to be a simple 3 year lease and you can't break it early, you might consider the equivalent of a cash for keys program, where you pay the media company to cancel the lease early. 

You could also make the purchase contingent on the media company agreeing to break the lease, which would reduce your risk. Sounds like a good opportunity.