What sort of arrangement do you have with your lenders?

1 Reply

Just wanted to see what sort of agreements were typical between an investor & their private lender? I know each situation is different, but i want to be able to present different options to investors. I'm looking to buy duplexes in most conditions (needing a full rehab to needing minor cosmetic work). I plan to hold them & collect rent, but I'm not opposed to selling it as a flip.

Right now i plan to offer an investor a 9% interest on his loan plus an origination fee of 1%. Another investor wants to be more "involved", i was considering offering them a lower interest ~5%, longer duration & a split in any profit from rent & profit gained by selling.

1) What loan duration's are typical for a private lender?

2) Do you refi with a conventional mortgage after the place is rented or after repairs are done? & are issues refinancing usually an issue?

3) In a lower interest & split profit sort of deal, what % split is normal? I'll be doing all the work.

4) Has anyone ever used a syndication structure with 3 people?  Acquisition fee for me, Investors get preferred return, then we split the profit. 

Originally posted by @Jerry Cima :

Just wanted to see what sort of agreements were typical between an investor & their private lender? I know each situation is different, but i want to be able to present different options to investors. I'm looking to buy duplexes in most conditions (needing a full rehab to needing minor cosmetic work). I plan to hold them & collect rent, but I'm not opposed to selling it as a flip.

Right now i plan to offer an investor a 9% interest on his loan plus an origination fee of 1%. Another investor wants to be more "involved", i was considering offering them a lower interest ~5%, longer duration & a split in any profit from rent & profit gained by selling.

1) What loan duration's are typical for a private lender?

2) Do you refi with a conventional mortgage after the place is rented or after repairs are done? & are issues refinancing usually an issue?

3) In a lower interest & split profit sort of deal, what % split is normal? I'll be doing all the work.

4) Has anyone ever used a syndication structure with 3 people?  Acquisition fee for me, Investors get preferred return, then we split the profit. 

1. To me, you are mixing terms. The straight loan for X% secured by the property is going to be pretty clean.

2. When you start offering a preferred rate of return with a profit split, you could easily find that the regulators will claim you are offering securities so need to be registered or show that you are operating under a specific exemption. 

3. If you start bringing in more people, where you do the work and they expect to earn a profit, you really are well down the regulated path.