Partnering with investor vs. Hard Money Loan
Investor · Jacksonville, FL · Member since 2023 · 12 posts · 0 votes
Partnering with investor vs. Hard Money Loan
6 Replies
- Financial Advisor · Boynton Beach, FL · Member since 2019 · 127 posts · 80 votes3y
Hey Corey,
Personally, I prefer to utilize local banks and/or hard money to complete deals rather than private money. For partnering with others, you have the option of splitting equity, or giving them a fixed rate of return on their capital in the form of private debt. Nowadays I'm seeing roughly 9-12% cost of capital when partnering with other individuals in the form of borrowing private money. The reason why I prefer local banks or hard money is because as long as the deal pencils out, they don't care as much about the day to day operations of the deal. They also have a lot more experience with such deals in general.
I only like to partner with someone if I forsee their being a potential of future partnerships that lead to higher scales of economy down the road. For one off deals, you'd have to 1) make sure you both are on the same page and have it in writing on every detail and 2) be prepared for a lot more potential drama throughout the deal if the other partner has concerns or doubts, especially if the deal gets a bit more bumpy.
Hope this helps. By the way I invest just south of Jacksonville, in the St Johns County area. Would be great to connect! - Investor · Houston, TX · Member since 2019 · 95 posts · 29 votes3y
It depends it comes down to Time, Money and Knowledge. If you are doing everything then ill probably offer 8-10%. I've done 50/50, 8-10% return, and private money/hard money. If you have access to cheaper money with less risk then I would go that route.
- Investor · Jacksonville, FL · Member since 2023 · 12 posts · 0 votes3y
Quote from @Mason Liu:
Hey Corey,
Personally, I prefer to utilize local banks and/or hard money to complete deals rather than private money. For partnering with others, you have the option of splitting equity, or giving them a fixed rate of return on their capital in the form of private debt. Nowadays I'm seeing roughly 9-12% cost of capital when partnering with other individuals in the form of borrowing private money. The reason why I prefer local banks or hard money is because as long as the deal pencils out, they don't care as much about the day to day operations of the deal. They also have a lot more experience with such deals in general.
I only like to partner with someone if I forsee their being a potential of future partnerships that lead to higher scales of economy down the road. For one off deals, you'd have to 1) make sure you both are on the same page and have it in writing on every detail and 2) be prepared for a lot more potential drama throughout the deal if the other partner has concerns or doubts, especially if the deal gets a bit more bumpy.
Hope this helps. By the way I invest just south of Jacksonville, in the St Johns County area. Would be great to connect!This helped a lot and I appreciate the response! I want to develop those relationships with potential equity partners, but I would also like to just keep it strictly with the numbers and keep the day to day operations currently with my partner only so I appreciate this wisdom.I would love to connect, I'm always in the Beachwalk area or in St. Augustine I love it down in St. Johns!
- Investor · Jacksonville, FL · Member since 2023 · 12 posts · 0 votes3y
Quote from @Joseph Neri:
It depends it comes down to Time, Money and Knowledge. If you are doing everything then ill probably offer 8-10%. I've done 50/50, 8-10% return, and private money/hard money. If you have access to cheaper money with less risk then I would go that route.
Okay makes sense. It basically depends on the sweat equity I'm looking to put in and what they are willing to offer and weigh the risk with each option. Thank you for your response!
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes3yIf you do not have 25-30% down then most likely hard money is going to be off the table in todays environment and you will need an investor to bring in equity.
Quote from @Corey Graham:
Hello Fellow Investors,
I am looking for some guidance, I am building a proposal to present to investors. But I am curious from people who have some experience or have partnered with others who provided the capital how was that experience? What returns did the investor expect to see? And did you see a benefit working with this investor vs a hard money lender? I want to explore all sides of this. I want to use leverage but I also want to make sure that there is a win across the board. If need be I can use my own money, but I would prefer to keep my cash.
the difference - one is a loan and gets interest, the other is they have equity and get profit sharing (on top of a preferred return typically).
There is no right or wrong answer, as many will say keep the equity but if you have an equity partner who has $2M to invest vs. hard money, then equity may be a better play.
7e investments53 Reviews - Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
Working with an investor will likely get you less desirable terms. The benefit to this is building a relationship to where you essentially have access to more money and flexibility down the line with terms.
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