Co-Ownership

What is a Co-Ownership in Real estate?

When the ownership of a real estate, is by more than one entity, such entities are called Co-owners or partners. They can be individuals, LLC, or any other form of companies. Typically these are grouped together in a LLC that is mostly managed by an attorney or a CPA, etc.

What is the number and size of Co-Owners?

Typically, the maximum number of co-owners for such scenarios are six. Typically the the min is $ 5,000.00 to max $ 1 Million.

How Joint venture between GC and the Owner LLC work?

The General Contractor (GC) provides full construction/technical rehab for a fixed price within fixed time for a given Scope of Work (SOW), and the Owner LLC (OLLC) provides the capital etc. The profits are split in certain predetermined %age between the GC and OLLC.

What if the OLLC does not have entire funds?

We have relationship with several bridge loan financing institutions who will typically provide financing up to about 65% of the appraised value of project and the OLLC needs to come up with balance 35% (Gap Funding).

What is the typical project size?

A typical project size is between $200K to $600K

What is the typical project period?

Purchase process takes about 2 to 4 weeks, reconstruction about 8 to 16 weeks, and to sell outright 4 to 8 weeks, or to rent 2 to 4 weeks.

What is Turnkey project?

When the project is to produce income vs an outright sale like in a fix and flip, it is called a turnkey project. The GC rehabs the property, places the tenant and manages the property for the benefit of the OLLC. The rental income is deposited in the OLLC bank account, every month.

What is the typical Return on Investment (ROI)?

So far it has been 20%+. We start with 40 to 50% markup from the estimating/bidding stage.

How is the OLLC capital secured?

The OLLC capital is secured by the real estate by the OLLC. Each OLLC is a single property ownership. Only one property can be held in one OLLC. The real estate (property) is deeded to the OLLC. The purchase and sale of the property or other major operations are a majority vote of the co-owners (partners). The administrator (the attorney) holds the body meetings on the web and creates the resolutions after the majority votes.

Does each Co-Owner have equal votes?

Voting rights are in the same %age as their interests in the OLLC. In the event of even %ages held by the OLLC the voting rights are same, otherwise it is not same.

How are the Co-Ownership returns calculated that are not for the entire project period?

Returns on Investment is prorated by the number of days in the project hence partners can join at any time during the project or sell their equity to others at any time. For example if the total funding by the OLLC is 120K and the number of days project f the project (day from first investment was procured till the day of final closing/sale) is 80 days then the total project investment days are 9600 PI units. If a Co-owner joined in the middle with 10K for 40 days, his share is only 400 PI Units. Hence he is entitled to only 4.3958% of the distributed profits.

Can a Co-Ownership be a working partner?

Yes, if voted by the majority. For example if one of the co-owner is a Realtor and sells the property through his efforts as a Realtor, then he is entitled to the same commissions that would have been given to any other Realtor in his place. The key is “Arms length transaction”.

What if a Co-Owner wants to buy the project upon rehab?

The biggest co-owner (by shareholding) has the first right of refusal before other co-owners and before it is placed on the market for sale, provided the value is same or higher than the appraised value or the purchase bid received from the market.

What are the expenses for the account of Co-Owners?

All purchase and sale expenses are on a HUD Statement that lists all expenses such as attorney fees, commissions to Realtor, taxes paid etc. Besides this the holding costs such as utility costs, taxes,mortgage if any, and rehab agreement etc are for the account of LLC.

Are there any cycles in the Real estate market?

Yes. All macro markets have an investment cycle. Historically, equity price busts occur on average every 13 years, last for 2.5 years, and result in about 4 percent loss in GDP.

Cookies

This website uses cookies to ensure you get the best experience on our website.

Accept