Looking at purchasing a move-in ready 3bd/2ba property for $115,000 and I think it's worth $130,000 ish. Plan is to rent for $1,200 and I believe I can get renters in the property in less than two months. I plan to use the lender I just used to purchase my primary residence and she said I can get a conventional loan, right around 5%, with 25% down ($28,750) on the property. I have $10,000 ready to throw at this deal and am wondering if syndication can help. I know I have 4-5 buddies that I could most likely get to come in for 2-5k a piece.
Plan is to purchase the property, get renters, refinance, pull out my down payment (if appraised at expected value). Contractually for my partners, I am considering guaranteeing a monthly return on their money with the option to get 100% of their money back after 12 months if they don't want to continue investing with me. Wanting some expert advice before I pull the trigger. Thoughts?
@Ryan Rogers I'm not an expert, but I believe syndication is typically for large deals and involves lots of regulations, lawyers fees, etc. You wouldn't syndicate a small deal like this. I would recommend finding a private (like your buddies) or hard money lender to come up with the rest. You could also see if the seller is willing to do seller financing. However, I would double check your numbers to make sure this is a good deal. With the monthly return you plan on paying to private or hard money lenders, along with the mortgage, expenses like repairs, capex, vacancy, management, it seems your margins may be rather thin.
I agree with @Danielle Wolter . The legal fees for a syndication will be far too high for 1 SFH. Also, having 4-5 people involved seems like quite a bit for 1 property. Would be better to partner with one person who can provide all of the down payment IMO.
If these are "Buddies" in the real since of the word, close friends, then you can pool money together without going through a formal syncidation process. Create a JV document outlining the terms, roi, interest and so on.
Good they are your buddies as other investors wouldn't take this deal if the returns are too low but since they're your friends I know you'll do them right and provide a good return.
This is a JV or partnership not syndication. It is too small and costs to setup will a good amount that will wipe out any returns or make them small.
Thank you all for the feedback. Are there legal specifications/requirements for an actual "syndication" then? Does a JV primarily just consist of a piece of paper outlining terms and conditions between partners? How do I determine when to use a JV vs. Syndication?