I’m spending almost all my time on the last minute details of getting this deal across the finish line. The Bismarck Deal is a purchase of over 200 apartment units in multiple buildings. The numbers are great and we have been offering a 10% preferred return to investors because of this. We are in the last phase of the raise right now and planning to close next week. I’m looking forward to getting it closed and starting to improve the place.
The Raise
In these deals, the raise is the amount of money that has to be brought in to make the deal work. Typically it is a range. There is a lowest number that must come in to make the deal work, and then a buffer amount that allows more investors to get involved, up to a top number. Why set a top number? We don’t want to raise more than that because it will dilute investor money, so that the return goes down as it is spread among multiple people. Why not just get the lowest number and no more? Well, we want everyone to be able to be involved, to gain experience, and perhaps invest in a future project. It’s also nice to have a little more reserves and be able to do some of the stretch wishes, such as a new television for the recreation room. The TV isn’t strictly necessary, but would be nice for the tenants.
The Bank
The bank is a necessary part of any of these deals and once you have selected one, you are stuck with them. You need to get them requested information as soon as you can, because the whole process of underwriting (where the bank vets the deal) gets held up if you are slow. On the other hand, sometime the bank is just slow. Or, the required appraisal is just slow. Any piece can hold up the deal. Both buyer and seller don’t like this, but usually will agree to move closing out to accommodate.
The Property
As a buyer, you also have to keep track of what the seller is doing with the property. As I’ve said before, it’s easy for the seller to take his foot off the gas during the diligence phase, and leave the buyer with a big headache. I’m continuing to monitor the seller’s work on the property and fix problems before they get big.
The Close
Once it is all put together, and believe me, this post doesn’t tell you the half of what has to happen, you close. At that point, crack open a bottle of champagne, but don’t get complacent. That’s when the real work begins.
We have our minimum raise, but are at the last part of the buffer raise. If you want to get in on this, send me an email, but there’s only about a week left.
