Am I being scammed?
I consider myself to be pretty savvy and, thus far, have been able to spot and avoid being scammed. However, recently in my pursuit for private money there has come an offer that has me a little unsure of proceeding.
My business partner and I have been seeking private lenders or equity partners to join us in some of the SFR deals we are doing. We've tapped our personal resources and are looking to partner with others. In this pursuit my partner has been talking to an individual who says they can provide up to $2mm to fund our deals.
Through ongoing conversations we have settled on an agreement for the lender to provide basically what could be called a $500k line of credit that can be used to purchase properties. Each property will be reviewed by the lender before actually releasing the funds. In exchange lender will actually be an equity partner and will get a portion of the profits.
When the JV agreement was presented for us to sign I noticed one of the first sections called for us to send $5k "as a fee required to start this funding Transaction". When asked about the reason for the $5k fee the lender responded saying the money was for "some of my costs for the SBLC and lending expenses. It is an incentive to me to offer the $5,000 option and I bring in all the funds". The funding for the purchases will be available in about 8 weeks from signing the agreement and send the $5k fee.
Everything else about this relationship seems legit, but, the request for monies up front causes me some concern.
Am I paranoid, or am I right to be leery?