I was wondering if anyone has purchased a larger Apartment in the 1 to 2 million dollar range with 25% down + closing costs etc. JV money and still manage to get the classic 50% interest in the property or have you had to reduce your percentage on bigger deals? If so by how much?
Larger Deal JV`s
- Thread starter gordgood
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We pitched a 26 suiter and a 24 suiter to arms-length angel investors earlier this spring. Went for it at 50/50 and they said it was too rich on our end. Also wanted us to have some skin in the deal which we didn`t have the money for. We got pretty close to hammering out a deal but in the end my partner and I decided that we`d be better off doing more volume in smaller properties than putting all our eggs in one basket and giving away the farm all for the sake of making the jump into apartment buildings.
These guys would be classified as the most sophisticated of any type of investor as they see deals across all ranges. Check out their website I was wondering if anyone has purchased a larger Apartment in the 1 to 2 million dollar range with 25% down + closing costs etc. JV money and still manage to get the classic 50% interest in the property or have you had to reduce your percentage on bigger deals? If so by how much?
These guys would be classified as the most sophisticated of any type of investor as they see deals across all ranges. Check out their website I was wondering if anyone has purchased a larger Apartment in the 1 to 2 million dollar range with 25% down + closing costs etc. JV money and still manage to get the classic 50% interest in the property or have you had to reduce your percentage on bigger deals? If so by how much?
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It is all in the `how` you pitch the deal and the way you show the value you bring to the table.
There are many ways to skin a larger deal. For example you could do a 50/50 and also offer them a return on their cash in which is paid out at the back end. Its just one idea.
There are many ways to skin a larger deal. For example you could do a 50/50 and also offer them a return on their cash in which is paid out at the back end. Its just one idea.
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QUOTE (PhilipMcKernan @ Jun 18 2008, 08:53 AM) It is all in the `how` you pitch the deal and the way you show the value you bring to the table.
There are many ways to skin a larger deal. For example you could do a 50/50 and also offer them a return on their cash in which is paid out at the back end. Its just one idea.
Instead of focusing on the 50/50 split we have re-structured the way we present our opportunities. We are offering people the option to purchase `Investment Modules` in our projects at a pre-set price per module depending on how much capital we require.
If we required 500 K from a JV (as an easy example) we would split that up into lets say 5 investment modules each available for 100K, each module will buy you 10% ownership in the project - how many do you want?
Hope that helps!
Dan
There are many ways to skin a larger deal. For example you could do a 50/50 and also offer them a return on their cash in which is paid out at the back end. Its just one idea.
Instead of focusing on the 50/50 split we have re-structured the way we present our opportunities. We are offering people the option to purchase `Investment Modules` in our projects at a pre-set price per module depending on how much capital we require.
If we required 500 K from a JV (as an easy example) we would split that up into lets say 5 investment modules each available for 100K, each module will buy you 10% ownership in the project - how many do you want?
Hope that helps!
Dan
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Curious Dan - what do you do for financing on multi units?
We are getting closer to having our business income up to the point where we can finance under the company banner but for right now we still need partner help in some cases to get approval.
If you need 3-4 partners to fund a deal do you bring everyone together for financing? One or two? finance it yourselves and back out your cash?
QUOTE (DanBarton @ Jun 18 2008, 10:48 AM) Instead of focusing on the 50/50 split we have re-structured the way we present our opportunities. We are offering people the option to purchase `Investment Modules` in our projects at a pre-set price per module depending on how much capital we require.
If we required 500 K from a JV (as an easy example) we would split that up into lets say 5 investment modules each available for 100K, each module will buy you 10% ownership in the project - how many do you want?
Hope that helps!
Dan
We are getting closer to having our business income up to the point where we can finance under the company banner but for right now we still need partner help in some cases to get approval.
If you need 3-4 partners to fund a deal do you bring everyone together for financing? One or two? finance it yourselves and back out your cash?
QUOTE (DanBarton @ Jun 18 2008, 10:48 AM) Instead of focusing on the 50/50 split we have re-structured the way we present our opportunities. We are offering people the option to purchase `Investment Modules` in our projects at a pre-set price per module depending on how much capital we require.
If we required 500 K from a JV (as an easy example) we would split that up into lets say 5 investment modules each available for 100K, each module will buy you 10% ownership in the project - how many do you want?
Hope that helps!
Dan
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QUOTE (RedlineBrett @ Jun 18 2008, 09:57 AM) Curious Dan - what do you do for financing on multi units?
We are getting closer to having our business income up to the point where we can finance under the company banner but for right now we still need partner help in some cases to get approval.
If you need 3-4 partners to fund a deal do you bring everyone together for financing? One or two? finance it yourselves and back out your cash?
Typically, we just finance ourselves under or company name. Once your into Multi`s, 6+, as you probably know they are looking more at the property itself than you, so we have found that beneficial.
Hope that helps,
Dan B
We are getting closer to having our business income up to the point where we can finance under the company banner but for right now we still need partner help in some cases to get approval.
If you need 3-4 partners to fund a deal do you bring everyone together for financing? One or two? finance it yourselves and back out your cash?
Typically, we just finance ourselves under or company name. Once your into Multi`s, 6+, as you probably know they are looking more at the property itself than you, so we have found that beneficial.
Hope that helps,
Dan B
QUOTE (DanBarton @ Jun 18 2008, 10:48 AM) Instead of focusing on the 50/50 split we have re-structured the way we present our opportunities. We are offering people the option to purchase `Investment Modules` in our projects at a pre-set price per module depending on how much capital we require.
If we required 500 K from a JV (as an easy example) we would split that up into lets say 5 investment modules each available for 100K, each module will buy you 10% ownership in the project - how many do you want?
Hope that helps!
Dan
Hi Dan
I was wondering how you deal with the legal aspects of breaking larger properties into modules. Using your example of requiring 500K how do you deal with the legal structuring. The bank looks for the module owner with the deepest pocket.If that owner has only 1 module he is not going to want to be held liable for a larger share of mortgage without compensation? How do you deal with the legal aspects of this type of deal.
If we required 500 K from a JV (as an easy example) we would split that up into lets say 5 investment modules each available for 100K, each module will buy you 10% ownership in the project - how many do you want?
Hope that helps!
Dan
Hi Dan
I was wondering how you deal with the legal aspects of breaking larger properties into modules. Using your example of requiring 500K how do you deal with the legal structuring. The bank looks for the module owner with the deepest pocket.If that owner has only 1 module he is not going to want to be held liable for a larger share of mortgage without compensation? How do you deal with the legal aspects of this type of deal.
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QUOTE (gordgood @ Jun 9 2008, 08:01 PM) I was wondering if anyone has purchased a larger Apartment in the 1 to 2 million dollar range with 25% down + closing costs etc. JV money and still manage to get the classic 50% interest in the property or have you had to reduce your percentage on bigger deals?
yes, we do .. through an LP structure registered with various security commissions ..
yes, we do .. through an LP structure registered with various security commissions ..
QUOTE (gordgood @ Jun 9 2008, 08:01 PM) I was wondering if anyone has purchased a larger Apartment in the 1 to 2 million dollar range with 25% down + closing costs etc. JV money and still manage to get the classic 50% interest in the property or have you had to reduce your percentage on bigger deals? If so by how much?
We are just working on such a deal right now, although it is 30% down. And yes we came to reduce our interest in the building to 40%. One of the biggest advantage in a commercial deal is that the income of the building qualifies for the mortgage not you or your investors. However the lender will require personal guarantees.
The key here is the lender might be happy enough to have those guarantees from you and only you as long as you mount for 50% ownership. Clearly if your interest in the property is lower than 50% your investors will have their personal assets on the line. Are they willing?
We are just working on such a deal right now, although it is 30% down. And yes we came to reduce our interest in the building to 40%. One of the biggest advantage in a commercial deal is that the income of the building qualifies for the mortgage not you or your investors. However the lender will require personal guarantees.
The key here is the lender might be happy enough to have those guarantees from you and only you as long as you mount for 50% ownership. Clearly if your interest in the property is lower than 50% your investors will have their personal assets on the line. Are they willing?
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QUOTE (roizes @ Jul 1 2008, 04:04 PM) We are just working on such a deal right now, although it is 30% down. And yes we came to reduce our interest in the building to 40%. One of the biggest advantage in a commercial deal is that the income of the building qualifies for the mortgage not you or your investors. However the lender will require personal guarantees.
The key here is the lender might be happy enough to have those guarantees from you and only you as long as you mount for 50% ownership. Clearly if your interest in the property is lower than 50% your investors will have their personal assets on the line. Are they willing?
The lender USUALLY takes personal guarantees only from the class A voting shareholders or shareholders of the general partner, depending on the structure of the deal .. and not always up tp 100% of loan amount ! NEGOTIATE .. or seek alternative lenders !
You can also get non-recourse financing (i.e. without a personal guarantee) usually up to about 60% of value .. get several options from a mortgage broker !
Our investors never ever sign a personal guarantee .. that is why they are called "limited partners" .. their liability is limited to their investment .. i.e. that is the most they can lose .. whereas you could lose more potentially ..
The key here is the lender might be happy enough to have those guarantees from you and only you as long as you mount for 50% ownership. Clearly if your interest in the property is lower than 50% your investors will have their personal assets on the line. Are they willing?
The lender USUALLY takes personal guarantees only from the class A voting shareholders or shareholders of the general partner, depending on the structure of the deal .. and not always up tp 100% of loan amount ! NEGOTIATE .. or seek alternative lenders !
You can also get non-recourse financing (i.e. without a personal guarantee) usually up to about 60% of value .. get several options from a mortgage broker !
Our investors never ever sign a personal guarantee .. that is why they are called "limited partners" .. their liability is limited to their investment .. i.e. that is the most they can lose .. whereas you could lose more potentially ..
QUOTE (thomasbeyer2000 @ Jul 1 2008, 06:00 PM) The lender USUALLY takes personal guarantees only from the class A voting shareholders or shareholders of the general partner, depending on the structure of the deal .. and not always up tp 100% of loan amount ! NEGOTIATE .. or seek alternative lenders !
You can also get non-recourse financing (i.e. without a personal guarantee) usually up to about 60% of value .. get several options from a mortgage broker !
Our investors never ever sign a personal guarantee .. that is why they are called "limited partners" .. their liability is limited to their investment .. i.e. that is the most they can lose .. whereas you could lose more potentially ..
Our investors are class A voting shareholders. The lender in this case wants guarantees from 51% ownership of the corporation. In any other situation we would have been the only guarantors but since we had to lower our % ownership it was not possible. The investors want more shares for their dollar and willing to put assets on the line in order to do so. Thanks for the comments!
You can also get non-recourse financing (i.e. without a personal guarantee) usually up to about 60% of value .. get several options from a mortgage broker !
Our investors never ever sign a personal guarantee .. that is why they are called "limited partners" .. their liability is limited to their investment .. i.e. that is the most they can lose .. whereas you could lose more potentially ..
Our investors are class A voting shareholders. The lender in this case wants guarantees from 51% ownership of the corporation. In any other situation we would have been the only guarantors but since we had to lower our % ownership it was not possible. The investors want more shares for their dollar and willing to put assets on the line in order to do so. Thanks for the comments!