All Forum Posts by: Steve K.

this is who all those syndicators lost so many apartments in 07 to 2011 they went vacant past the break even point could not feed them could not maintain them and they folded..

I am considering purchasing a small handgun for protection when going to look at properties in unfamiliar areas. Is this something I can write off at tax time as a business expense?

The "experts" have been wrong about many things (i.e. the stock market crash that would ensue if Trump was elected). In contrast to the naysayers, here are the opinions of three major players in the residential housing market:  to view.

A recent article by Teo Nicolais, a real estate entrepreneur who teaches courses on real estate principles, markets, and finance at Harvard Extension School concluded that the next housing bubble may not occur until 2024.

The article,  looks at previous peaks in real estate values going all the way back to 1818. Nicolais uses the research of several economists. The article details the four phases of a real estate cycle and what defines each phase.

Nicolais concluded his article by saying:

The reason for the price appreciation we are seeing is an imbalance between supply and demand for housing. This has created a natural increase in values, not a bubble in prices. So long as inventory and interest rates remain low, home prices will continue their upward trend. As interest rates rise, prices will level out. 

I know people frequently structure deals with disproportionate distributions to the sponsor to reward them for their performance. 

Every waterfall model I've ever done has used IRR targets as hurdle rates.

This is great and all, and obviously if the property does exceed these hurdle rates, the sponsors can get paid off in a big way...

But since so much of the IRR comes from the sales proceeds, the sponsor doesn't see any of that bonus until the end. And why should they, right? I mean, most of the return for the investor is coming from that last cash flow when you sell. 

The problem is, if you're a lowly sponsor without much money, you might have to live off of your crappy pro-rata cash flow for years before your partnership sells off properties and you're rewarded with a huge windfall. 

Are there cases where sponsors are rewarded if they meet certain cash on cash targets, rather than IRR?

So far example, rather than giving the sponsor a 20% promote for anything above a 12% IRR, they'd receive a 20% promote for every year they exceed a 12% return on equity, then receive 20% on the backend in excess of whatever return brings the cash flows above 12% IRR. 

As an investor, would you ever consider this type of arrangement?

One alternative might be to give your investors a preferred return, and a locked in profit split for when you sell... do you think promising a preferred return would create problems for lenders?

Anything thoughts would be appreciated. 
Thanks,
Patrick 

had this exact same thing happen to me late last year

I am told that the minute they are late with a payment now, the motion is filed and granted

they are also required by the court to set up a repayment schedule, and are strictly held to that too. unfortunately, that schedule may be long.

Option #6 - Invest in commercial syndications (apartments, self-storage, mobile home parks, retail, industrial). With your SFR experience, you would know how to pick good opportunities and operators.

Selling or exchanging 20 SFRs for a single property is impractical...would likely have to involve a portion of the portfolio (or a discount to a single buyer).

@Tim G. - what is DT?

@Ryan Zaninovich, if you're not stubborn on active buy and hold play only, consider investigating syndicated opportunities. A lot of Sponsors offer an 8% preferred return, I.e. you see 8% before they take anything, and returns are often greater than that with downside protection modeled in (if you've got a good Sponsor, that is).

MFH syndication is a popular one, but you can also find deals in SS, MHP, etc which have the potential to offer even more lucrative returns. A couple of articles I've written on MF syndication specifically:

Recipe for Successfully Investing in Multi-Family Syndication

8 Reasons Why Apartment Syndication is an Appealing Investment Vehicle

Happy to discuss if interested so don't hesitate to connect

The reason I did the high percentage debt is that hard money folks seem slow and getting cash off the credit card was such a quicker process. When I see the deal I want to grab it. I also don't have to deal with construction crew estimates and ARV appraisal fees when I go through a credit card instead of a hard money lender.