Things are heating up at Michael Capital

The journey to making real estate accessible for our friends is well on its way. 

The past several weeks my brother and I have been actively meeting and thoroughly vetting attorneys, property management companies, brokers and advisors. 

Lot’s to cover in this update. 

Legal

For legal, we landed with Harlowe and Falk LLP.

We will be working with Mario Parisio, specifically. 

He has been a partner at Harlowe for over 18 years. 

His practice areas include commercial real estate and general business. 

Formerly he is a CPA, Certified Management Account and Sr. Financial Officer for a publicly traded financial institution for eight years. 

He is expensive (charges $480 per hour) but it is important for us to work with someone that has deep domain knowledge in multi-family law. 

He will be forming our Operating Agreement, Subscription Agreement, Suitability Questionnaire, Private Placement Memorandum, etc.  

Property Management

In regards to Property Management, we will most likely work with Fulcrum Real Estate Services.

They are locally based and manage over 1,100 multi-family units in the Puget Sound and Pierce County areas. 

They provide a strong marketing platform for each property and an owner portal for us to asset manage. 

We will mitigate a lot of risk by working with a firm who specializes in the local market, on top of our local knowledge growing up in the PNW.   

The PM company gets paid by taking 5-7% of the property’s gross revenue. 

This incentivizes management to push rents to market, as they do not charge leasing/renewal fees.

They handle all leasing, maintenance, rent collection, and everything that goes into making the property profitable and operating efficiently. 

Garrett and I will actively oversee all operations of the property to ensure operations align with the budget and that rent projections are being met. 

As well as ensuring every tenant is satisfied with where they live. 

In addition, Garrett will be actively walking the property on a bi-weekly basis.

He has prior experience inspecting multimillion-dollar multifamily properties for a national bank and is a Freddie Mac Certified Inspector.

Syndication Structure 

We have also been discussing how we want to structure our syndication (aka how our investors will get paid). 

We are dedicated to every one of our investor’s success, so we will be much more favorable to them (hopefully you).

We are not charging an acquisition fee, asset management fee, refinance fee (if applicable), or disposition fee.  

By doing this, we are able to be more competitive on pricing when submitting LOIs on deals. 

We would rather make our investors A LOT of money versus squeezing in as many fees as we can from the General Partner side.

Here is a simple break down of how we are planning to structure our deal -

8% preferred return of cash flow, paid monthly to investors. 

Quarterly, we will distribute the additional cash flow above the preferred return (We are expecting 2-4%+).

Above the preferred return, 50% will be distributed to investors and 50% to GPs, from a refinance or sale.

Target hold period is contingent on current market conditions and anticipated to be 3-5 years. 

Garrett and I are both investing alongside our investors, with no less than $100,000. 

We want to be financially invested in the deal as well, not just acting as GPs. 

Networking 

We are also actively on Clubhouse. 

For those that do not know, Clubhouse is an invite-only, audio-based app for hyperlocal communities/conversations. 

We have been meeting with many successful multi-family syndicators/investors with $100s of millions in Assets Under Management (AUM) on Clubhouse.

We made a few notable connections. 

We really enjoyed connecting with Hayden Harrington. 

Hayden is 26 years old and just closed on a $30 million property in Houston, TX. 

Insane, right!?

He instilled ideas for fundraising and finding the right partners. 

We also met with Pili Yarusi, who is the General Partner on 800 units. 

Pili and her husband are a power couple, proving success in the commercial real estate industry. 

We spoke with her about being an advisor and her unique approach to mentorship.

P.S. I have a few Clubhouse invites, so please message me if you want in.

Next Steps

In the coming weeks we will be meeting with banks to solidify the debt side of the deal. 

We will be meeting with Umpqua Bank, Alaska Credit Union and a few others.

This is the last main piece to the puzzle.

Additionally, as we continue to analyze deals, will keep you in the loop on what we are seeing in the market.

Once we secure a deal under contract, we will send out an Offering Memorandum to all investors, which lays out the deal and business plan. 

We will also provide an investor webinar for Q&A.

In the interim, please don’t hesitate to reach out with any questions or comments.