All Forum Posts by: Tony Kim

True, but I think equally bad is having a fund with a 60/40 split between 15% to 28% IRR. Won't mention what it becomes above 28% as the mere mention of that split would scar me for life.

a) How can I trust he is putting in $1M of his own money.

When people are new (under $250m of AUM) I would want to see 10-50% of the capital required. Granted when people are new their net worth is low so they probably don't even have more than 200k to throw into the raise.

b) I have done LP deals in professionally managed syndicates by PE firms before. First time doing Tenants in common. Are there things I need to watch out for

Do you background check. I would personally not do a deal with anyone who has less than 1B in AUM unless I knew them personally, had the ability to take over the GP, and there was an big split for me coming in and giving a newbie a chance (90/10 LP GP split for example).

c) Any other things to be careful about investing with a first time syndicate

Good luck... I would not do it but hey its your money.

@Bruce Woodruff 

I used to own 6 duplexes and 2 SFR's in Rochester NY and replacing roofs there seemed to be some kind of semi-annual event. Also, hot water heaters. I really question whether you can expect the same life span given the weather difference, but I concede I am no expert. In any event, as Jay points out above, the main point is the 2 versus 20.

People who pay $5,000-$5,500 to rent a house in the Bay Area tend to be pretty easy on the properties and tend to stay for longish periods of time. There is always a line of tenants ready to take over so transitions are minimal. We withhold listing properties that become vacant in order to make repairs/paint because in virtually every case we otherwise have folks inundating us with requests to move in as is. Folks who invest "by the door" tend to underestimate (sometimes vastly) the cost of tenant transitions, and with 20 apartments you are going to have running transitions even if you buy 5 multi's in lieu of 20 SFR's.

Moreover, I personally have not paid a penny due to California's "regulatory" costs.  My property taxes are predictable from year to year.  This is in contrast with  the rest of the states where each year is a surprise ( true in my experience ion Florida and NY - especially school tax).  In 25 years, not a single eviction or threatened eviction in CA.  In fact, judges here do not take kindly to folks who make good six figures not paying their rent. They do not come off as sympathetic litigants.   I had a much harder time in Rochester city court trying to get rid of the $550/month tenants who refused to pay (and there were more than a few) as every one had a sob story and was able to get multiple extensions.

Of course, there's no disputing the management cost issue.  Self-managing 20 units is one hell of a pain any way you slice the proverbial pie.   

 The problem is significantly beyond that.  USA is not the country with the highest level of money printing.
It's Japan number one, also country like Belgium,Spain,France,Singapore has the same level as US. 

The most significant problem is since US Dollar is the default currency/reserve of the world, then if there're any **structural changes**
in interest rate in US, the Rest of the world has to adjust to US rate, this is especially true for country that has deficit on export where they
are buying things for their people in US Dollar.  Also the whole theory of 1928 inflation happened when Dollar is not the major world currency reserve. 

The US ciizen can prosper *easily* ***without too much work**** (note this) until this day because all other citizen of the world outside US has to pay their food, good and item following US Dollar. 

Indirectly the ROW  is sustaining the US economy.

IF the US Dollar too strong, then the ROW can't buy food for their people.  

That's why at this very second, investors in Japan is now selling their US bond.

In today's structure global world system. It's expected US and Japan to be have the lowest interest rate in the world, with the developing world having higher interest rate.

Interest rate hikes in US is equal to ecomic crash in Asia and ROW.

If this continue, this will trigger de-dollarization and ROW is starting to use non-Dollar as the alternative reserve currency.

I gotta add this - the cynic in me wonders how much of this Fed reaction is due to the upcoming election? Meaning that they are desperately trying to reduce inflation to help the side in power.

Or am I just getting too deep now....?

Agree 100% Interest rates play a huge factor. I think there are many factors at play here. Some of it, believe it or not, are the backward laws here that were intended to protect the middle and lower class....which like most laws, had the opposite effect. 

It would be interesting to see what would happen across the country if mortgage rates went into double-digits. This was a real possibility when there were plans to dismantle Freddie Mac.  I'm certainly no expert on what's going on, but I don't think that was a feasible plan, considering what it would do to interest rates. 

Got it. 

Since this thread is about a market crash and Will was discussing the chances of a decline in California prices, just thinking out loud and can't help but think that demographics play a key role. If it didn't, then the country of India would have the highest real estate prices on the planet 🤣 It can't be easy for folks who grew up here to see all these foreign born folks come in and land high paying jobs and drive up real estate prices. Not everyone is ready for what has been happening to California and I don't blame them for leaving.