All Forum Posts by: Mark S.

Well, considering I'm just getting started and there's really nothing to go after yet, does that change your mind @Mark Fedorov?  

@Darren Eady, I like the idea of setting a limit. I'd rather have my first few deals in one LLC before I go crazy setting up multiple LLCs.

I created an LLC to do local small scale syndication deals in my area, which I still plan to do. I am also strongly considering getting involved with out-of-state turnkey rental real estate and would also like for those properties to be in the same LLC.

My question is whether or not a lender would likely allow the LLC to own the property from the start (to avoid having to transfer it later) and just have me sign a personal guarantee of some kind. I know there are lenders that lend directly to LLCs, but the terms don't seem nearly as favorable.

I guess the only way to find out for sure is to ask the lender directly, but I figured I'd tried to get some feedback here first, since I'm sure others have come across the same situation.  

By definition, cap rate is NOI / purchase price. If you don't factor in cap-ex into those numbers, I hope you're providing vouchers for free roofs, HVAC systems, etc.

Aren't there other expenses, or reserve items, that should be factored into the cap rate? Things like estimated vacancy loss, cap-ex and maintenance reserves, etc.? 25% cap seems ridiculously high.

@John Leavelle, yes, I would be passive. I've been in contact with some references and all had positive experiences. I've decided not to move forward with this particular deal. I agree and my ideal CoC is also >=10%.

Kevin Siedlecki , thanks for your reply. As for the rehab, I'm told front part of roof needs new sub roofing and roll roofing, ceiling work in Apt one from old leak-- its functional but looks horrible, carpet, paint and other start up items (proper safety equip, HVAC service, etc.). The 10% would be of the LLC that is set up to own the property. The LLC would have an operating agreement that spells all this out. Basically, anyone has the right to sell their shares, but syndicator has right of first refusal. I'd have to take a closer look if two of the partners want to sell the property, how and whether or not that majority would force a sale. Great point. The dollar figures for cash flow per unit aren't horrible (at least they wouldn't be IF we were using financing), but the percentage rate of return (especially with a lot of the unknowns that come with a 100+ year old property) is pretty dismal, I agree. Last point, as this whole syndication thing is new to me, but do investors normally ask to/get to see the inside of the property prior to putting money in the deal? I know the whole idea is for it to be turnkey, but since I'm local, I didn't know if this would be an unreasonable request. I'm definitely going to drive by, but it's a lot of money to invest essentially sight unseen from the inside.

I was presented with the following deal: Triplex (Built in 1900, excellent location) Purchase Price: $145K Rehab + Closing Costs: $8K Total Investment: $153K Gross Rents: $2,000-$2,300/month Expenses: PM Fees @ 10%: $200-$230/month Owner Paid Utilities (avg): $440/month This includes water, sewer, electric, gas. Taxes: $150/month Insurance: $75/month (guesstimate) Cap-Ex @ 10%: $200-$230/month Vacancy @ 5%: $100-$115/month Maintenance @ 10%: $200-$230/month Total Expenses: $1,365-$1,470/month Total Cash Flow: +$635-$830/month Total Cash Flow / Unit: +$211-$276 10% equity would go to syndicator on back end. No upfront fee. Roof needs replaced in 3 years. All cash purchase among 3 investors. What do you think?

Middle?

Meghan McCallum , I'm also interested in finding out more about your turnkey provider.

Michael Glaser , if it were me, I'd suck it up and pay the fees for the business account if absolutely necessary. You should check and see if there are any credit unions nearby with business accounts. I opened one with virtually no minimums, no maintenance fees, etc., and paid $11 for checks. I would think the major risk would be not treating the LLC like a business. I would think it'd be one thing to make capital contributions to the business account from your personal account, as well as making distributions in the opposite direction, but clearly funneling rent checks through your personal account into the business account would be very different. I would consult your attorney if I were you.