Tell me what is wrong with this Havasu real estate investment plan....

[Mandelon]

I was entertaining the idea of getting a group of investors together to buy a midsized apartment building, say 12 to 18 units.
The general idea is this, everyone (4 for this example) kicks in 1/4 of the downpayment, which for a commercial loan is typically 30%. At that LTV we shouldn't have any trouble getting positive cashflow out of it, even with a local property management company doing the dirty work.
One unit we would keep for ourselves. The 4 owners would each get one week a month to use it. So it is essentially like a timeshare.....except it appreciates and should actually pay you back a little check every quarter as well.
This could be done on multiple properties if one wanted more time than a week. If you didn't want it for your week it could be rented out or traded with the others....
OK. Sounds nice right? So now tell me why it won't work.

[Kilrtoy]

I dont want to be a "partner" with another MALE

[Mandelon]

You are spending all your money on motorcycles and boats anyway.....:D

[Lightning]

It would work fine, assuming you don't mind dealing with the terrible t's of ownership in an income property;
tennant
toilets
trash
turnover
Assuming you can handle all of those issues it should work out fine. A couple of questions:
is the property owned as equal interests with tennants in common? or do you form a corp to protect individual interests of the investors and have the corp by the property?
If you form a corp, will a lender fund the project?
How is the rental market in Havasu? Is there enough out there that will support a rental market for an apartment building?

[Ziggy]

Because you all will want to have it the same weeks---duh:rolleyes:
Anything is possible if you set it up right...

[Havasu_Dreamin]

Very intriguing idea indeed Mandelon.

[ROZ]

Make sure you put gas and electric meters on every unit so each renter pays his own utilities... SOme of the old unit out there aren't rigged that way...
Why nt do the same with a 4 unit building. That way you don't have onsite management...

[Jrocket]

The idea sounds great except for the sharing 1 unit for the buyers.Too much hassle.What kind of money are you talking about to get something going?Per person?25K 50K 100K?

[RiverToysJas]

I like it, except for the 12+ unit part. That's too much. I'd do it with 4 units, rent all four. Bank the profits and do it again. Bank the profits and do it again. Now your investors have 12 units, but not all in one basket. NOW you can start paying profits out quarterly. Each investor can use their profit for whatever they want, but would be wise to put that into their very own river houses. ;)
This plan is longer term, but has less risk & less capital up front IMHO.
RTJas :D

[Garrddogg]

I LIKE IT !:D
I want in..:cool:

[Outnumbered]

You will probably get better terms on a 2-4 unit than a 5+ unit project. Also the quality of renters in a 10+ unit project out there may be some folks you wont want to hang with on the weekends. Do they even have any big units out there?
OL

[CA Stu]

It would have to be called "Blind Agoraphobic Nympho Millionaire Strippers Who Like To Get Doinked While Doing The Housework Naked And Own Liquor Stores Village Apartments" or I'm not interested.
Thanks
CA Stu

[HavasuDreamin']

Check the occupancy history and expense history on the property. You could run into a number of stumbling blocks.
Next talk to local "Commercial" Real Estate brokers, agents, leasing, etc. to find out how "healthy" the rental market is.
Good Luck. :)

[Essex502]

Know your other three "investors" really, really well...when things like this go sour it's usually personality conflicts or one partner doesn't hold up his end of the responsibility. I don't partner with anyone (except my wife of course) because business is the best way to lose a friend.

[copperrat20]

I agree with essex and I can tell you from personal experience that buisness is the best way to loose a friend. My first house few years back in havasu. Partner was my best friend. Great guy and all then his brother talked him into screwing me. Don't get me wrong, I think it is an excellent idea! But what kind of responsibilities would the partners have. Or are you going to take care of everything and just collect the cash? Are you just looking for silent partners? I know someone that owns a duplex lot close to walmart in LHC that you might be able to get a deal on!

[welk2party]

This is how I see it:
1. A larger unit comlex would be better suited if your investor group was actually a propery and investment management corporation. This corporation would then solicit investors for the down payment and any other additional costs. This corporation would be the one to put these people in a security such as a 1031 exchange. You will get a commercial loan with a larger complex and also provide more insulation from liability. Take a management fee and a small stake in equity and become an owner through a corporation. Pass the rest to the investors and the bank. Done this before.
2. Smaller units would require you to get a loan from a bank in a similar fashion as you would buy a home. Everyone would have to qualify and be equally responsible for the payment. This spells trouble. Who is responsible for sending the check every month. Can the others trust that person to do this? Their credit is on the line. Also, your debt ratios will be affected when you need to purchase something on credit. Not a great thing to do with partners in my opinion.
3. In any scenario, you must perform exhaustive due diligence to make an educated stab at an investment.

[Skaterfast]

Never ever buy property with partners.This includes cars, boats, etc. There should be no explanation needed.
NEVER!

[Mandelon]

The larger building seems to make more sense, I know the commercial paper would be higher priced, but the loan could be made to an LLC or corporation. At 70 % LTV they would be OK with the risk. That would provide protection for the investors.
I know that picking the right people would be an issue, but a lot of the screening has been done right here. Sorry Lake Pirate, but your are not gettin in on this one. :D
Its not an overly risky proposition. People do these things all the time. lA Local property manager would have to deal with the trash and the toilets.
With smaller complexes, you can do it yourself and don't need a partenership. Refi your house and go buy one. I'd rather have duplexes closer to home though where I can keep an eye on them. With more units, there is more cashflow to cover management fees...
I like the idea of having a unit available for the owners, that's almost the whole point. To have a "free" place to stay.....

[copperrat20]

Well-I don't think it is really the point of having a free place to stay. It is really a matter of having a place to stay that pays for itself. All of the work effort that will be involved in completing such a business venture will not be free.:D But we get the idea and it is a good one. Alot of work, yes, but a good idea. Now the key is making it happen!:)

[boxscore]

Sounds good... But..
1. Build new construction
2. Lender will fund Corporation, but at least a couple of the individuals will have to personally gaurantee the money.
3. Build additional large building on the lot for BOAT STORAGE!
4. Make it a nice enough project, i.e. 3bd/2 bath so that the mgmt co can rent some units out to transient tenants, i.e. havasu visitors.
5. Dont overleverage. Create a situation where it cash flows immediately and for the long term. The market is way to weird right now to risk dumping operating capital every month to an underperforming property.
Personally, I'm in the apt business. I have 70 units here in the Coachella Valley. I've been kicking the idea around of building 2-4 units in Havasu for some time now, with the kicker being nice, convenient boat storage, a fresh swimming pool, and a place to send my Mom in the winter ( keep a unit for myself). But a 20-25 unit project would be the ticket. But that's a ticket that I individually can't do. PM if your serious about it. Thx

[boxscore]

BTW mandelon. My 6 y/o daughter was doing your avatar dance at you through the truck window at a red light last weekend. You were too busy manuevering that lavey through traffic to notice.:p

[Chris Winn]

hello Mandelon,
this type of thing could work, my dad did thid years ago down in mexico with land that they leased for 99 years. the way that they set this up was thta beside the down payment there is an account that everyone each banks 3-4 months worth of payments into (the payments were automatically deducted from this account). doing this eliminated some of the problems with someone losing a job or falling into hardship, it allowed time for decsions to be made that when done right, did not cause strife or ruin good friends.
this sounds like a wise idea, but wouldn't it be better to build newer nicer places if there was not any decent one avilable. on the other hand, on site boat storage would be needed for the partners also.
just an idea?
:cool:

[Phat Matt]

I would put up my money on this idea as long as Mandelon was not my partner. :D J/K F'it, let's do it. You only live once and I have money to burn. :p If it doesn't work out were not that good of friends anyway! :D BTW, can I still stay at your house if I come down to SD? ;)

[RiverToysJas]

Originally posted by Mandelon
The larger building seems to make more sense, I know the commercial paper would be higher priced, but the loan could be made to an LLC or corporation. At 70 % LTV they would be OK with the risk. That would provide protection for the investors.
I know that picking the right people would be an issue, but a lot of the screening has been done right here. Sorry Lake Pirate, but your are not gettin in on this one. :D
Its not an overly risky proposition. People do these things all the time. lA Local property manager would have to deal with the trash and the toilets.
With smaller complexes, you can do it yourself and don't need a partenership. Refi your house and go buy one. I'd rather have duplexes closer to home though where I can keep an eye on them. With more units, there is more cashflow to cover management fees...
I like the idea of having a unit available for the owners, that's almost the whole point. To have a "free" place to stay.....
Alright, I'm in! :D
RTJas :D

[hava life]

does anyone see a turn in the market or is it just me:confused: I know alot of people doing the opposite,meaning selling what they can. You might want to look at the market it seems real high and rates are creeping up. be very carefull Havasu is mostly vacation property and will be hit hard if economy gets weak after the election.

[coolchange]

Definatly LLC. Whats the vacancy rate for apts in LHC?
Maybe the whole thing as time share? TS the summer, snowbird the winter. 4 units could TS 16 investors. One or two flakes wouldn't kill the whole thing, just repo, resell. And trade between the16 for holiday use.
Definition of a partner; someone that used to be your friend.

[Mandelon]

Now you guys got me thinkin....what about "The ***boat Hotel"?
It would be a two dozen bitchen condos with double deep, and double wide, pull through garages, with roll up doors on each end.......and then an open and airy 3 bedroom and 2 1/2 bath residential unit over each one.
Pool, jacuzzi nice common area room with pool tables, ping pong ad foosball........who's in for that? :D
Only ***boaters need apply!! :D

[copperrat20]

hell with that garage count me in! do you want payment in cash, check or money order?:cool:

[rivercrazy]

I have to agree with those recommending not to partner up on this type of investment. There are way too many potential issues that come up that way over shadow any of the potential benefits. Save your pennies and do it yourself and reap the 100% of the benefits of the investment and cash flow.
From a safety valve basis, I'd recommend backing into a down payment by figuring a 50% vacancy factor that generates enough cash flow to make the loan payments. Bullhead isn't known as a steller rental market. The local economy just doesn't provide enough of a labor market or salary base to attract your higher end desirable tenant base. Those that do make better income will have purchased their own property. So your left with the lower income rental base. That leads to another set of problems when the move out i.e. $$$ to fix up the unit for the next renter.
Also be careful in assuming that market appreciation will take place. The run up in values up and down the river is driven by California money, not Arizona. If and when the economy here slides, people will be dumping their vacation property out there which will cause a supply and demand balance issue resulting in declining prices. The local Arizona economy just doesn't support the prices your seeing out there.
Do all your analysis. Be very objective with the data. Know the local economy. Market conditions, etc. That will lead you to the right investment decision. :D
Just IMHO and .02cents
Oh and one more thing - Owing a property in a legal entity is always a good idea. But that doesn't shield the owners from liability in all cases. And there isn't a lender or bank in town that won't require the personal guarantees of all the owners.

[Phat Matt]

Yeah, and lets add stripper poles on the balconies with a full bar! I like it! :D

[boxscore]

The garage is the kicker.... 30' please. Where can I wire my funds?

[RiverToysJas]

Originally posted by Mandelon
Only ***boaters need apply!! :D
Well I'm out, I just have a family bowrider with stock merc power. :( :D
If you form a Corp or LLC no reason to limit it to 4 investors. Come up with a share value and people could buy into as many shares as they can efford, or are comfortable with. Each share could also be assigned a certain amount of time in the common unit. For simple math, I'll use the example of one share is equal to 1 night a year, the more shares you buy, the more time you are entitled to. These are not public shares, their value could be what you make it. Even say that you have to get a min. of 5 shares to participate if you want to. Just ideas....
RTJas :D

[RiverToysJas]

Originally posted by rivercrazy
Also be careful in assuming that market appreciation will take place. The run up in values up and down the river is driven by California money, not Arizona. If and when the economy here slides, people will be dumping their vacation property out there which will cause a supply and demand balance issue resulting in declining prices. The local Arizona economy just doesn't support the prices your seeing out there.
On that note, apartment buildings and multi-family dwellings don't appreciate/depreciate at the rates as single family homes. A friend of mine had a couple of apartment buildings in LA that he was upside down on, even a few years into the upswing in housing. They are not the same market. ;)
RTJas :D

[rivercrazy]

Bullhead ain't LA brother! :D
The value of rental property is almost completely reliant on the stabilzed rental income. Higher stabilized rents lead to higher values. Bullhead isn't known as a region enjoying significant growth in rental rates (relates back to income of local renters).
All I'm saying is do your research. Know exactly what yur gettin into.

[TIBURON]

Originally posted by Phat Matt
Yeah, and lets add stripper poles on the balconies with a full bar! I like it! :D
Tell you what, you put them stripper poles and a nice big bar and I'll lease it. You know a little home away from home..:D

[welk2party]

Originally posted by rivercrazy
And there isn't a lender or bank in town that won't require the personal guarantees of all the owners.
While not many do, there are some that will, depending on how the deal is structured.

[Froggystyle]

Seems to me that the additional income from a single apartment rented out instead of kept for private use would more thanpay for a weekend in a hotel, without the wasted week of vacancy, without the hassle of "roommates" and with likely better amenities.
Not to mention the drama once one person decides to park their boat there...
Sounds like a bad recipe for disaster. Plus, who would want to do lanlord shit on their weekend? I would keep it business only, investment only.

[welk2party]

If you want to do something like this, you would be better served owning commercial property such as a strip mall.

[rivercrazy]

Originally posted by welk2party
While not many do, there are some that will, depending on how the deal is structured.
Hard money lenders ain't cheap! :D

[welk2party]

Originally posted by rivercrazy
Hard money lenders ain't cheap! :D
True. But there are banks and other lenders that will do projects like these. It all depends on how the deal is put together.

[Phat Matt]

Originally posted by welk2party
True. But there are banks and other lenders that will do projects like these. It all depends on how the deal is put together.
Do you know anybody who sales commercial real estate? :D

[welk2party]

Originally posted by Phat Matt
Do you know anybody who sales commercial real estate? :D
I might.:cool:

[TIBURON]

Just get four people and by a 4-unit. Put a big pool and everyone has their personal unit, plus it'll be cheaper and funner than buying a single family home.
And if the lot is big enough throw some storage on it too..
Dam! I think I want to do that now....

[Phat Matt]

Originally posted by TIBURON
Just get four people and by a 4-unit. Put a big pool and everyone has their personal unit, plus it'll be cheaper and funner than buying a single family home.
And if the lot is big enough throw some storage on it too..
Dam! I think I want to do that now....
It will be just like Melrose Place except for it's in Havasu. :D