BiggerPockets

I'm looking for people wanting to make 6%-10% on their money secured by property. :D

I'm just learning about all this, and I might be way out in left field, but I want to find properties to buy subject to, and then lease option them. I would receive a non-refundable down payment on the lease option and enough of a down payment to not be a landlord, to a certain degree. I want to make $100-$200 a month on the properties with around $30,000 in equity. So as far as the 35% on residual, that would be the monthly profit and what I make on the sale at closing? If I buy subject to I don't really need investors money but I want access to some in case I need it. Thanks for the help. I hope I don't sound like an idiot. Just trying to learn and ALL constructive criticism is welcome.

Ok thanks! That makes sense. I want to find homes that haven't become in default yet but that might prove to be difficult. But like you said, I would need the investors money to make up back payments if necessary.

Jeff,

Sorry, but I don't see the correlation between agreeing to split residual profits (35%) and not knowing enough about how to market to attract private money. There are a lot of times I prefer to split the profits rather than to pay ridiculous points or a ridiculous rate for the life of the investment.

But then again, there must be something your books are telling you about PM because I'm not sure who would loan at 8% for an investment property. Realistically.

Well that depends on how you are paying the 35%. On a $20,000 house with $4,000 in fix up cost that you are renting for $500, 35% of cash flows is $175/mo.

However, if you are willing to pay 10% on a 30 year loan, you will be paying $210/mo. 12% and you're looking at $246/mo.

You also must consider that if you are paying '35% of gross cash flows', you are only paying an investor when you get paid. With a mortgage, you must pay every month. You can do this without relinquishing control of your company.

Obviously there are hundreds of different ways to structure the same deal. All of which depends on what works best for your investor.

I know it sounds like there would be a lot of people earning 3-4% on their money would love a chance to double that return, however, it is rare. Most people when managing their money look at investments from a risk/return scenario, where in REI we often do not because we know things are high risk but we are making so much money out of doing them that we ignore that.

With normal investors, yeah they are maintaining 3-4%, but that is in a 12-month CD through their bank or in T-bills. Very low risk. Now you are talking about lending money on a RE investment property with a private investor, which is A LOT riskier and could possibly go a lot longer than 12 months. Obviously for taking this risk they want a premium, however, personally (and risk/return ratio is usually an investor preference) 4% extra isn't really going to make up for the very high chance the investment doesn't work out perfect.

Securely huh?

I am currently working with a few investors and i have worked out a great deal just recently. I found the property, am doing all the leg work. They put up the money, we are going to get it fix then flip it and split profits.

Sure i could work out other deals and make myself more money, but the more money is in his pocket as well, the more money they are going to want to invest with you. Its all about keeping your team happy. Its like a business retail product. Lower profit margins but higher volume is the way you have to work with investors if you can not source funding on your own. Much better then higher profit margins and ultimately a lower volume.

Good Luck!

Christopher & Woodrow - That's a great discussion, but would you mind starting a new thread to discuss? Lets continue talking about Jen's post:

I'm looking for people wanting to make 6%-10% on their money secured by property.

I just have to jump in this to let you guys/gals know how much I appreciate the help... I didn't start the thread, but its good that those with the experience are able to take the time to inform those of us without it... thanks again.
Dustin