Red deer, Alberta · Member since 2017 · 17 posts · 7 votes
I have a solid deal with a private investor supplying the cash for down payment.
The cashflow is around 8.5% Cash on cash.
How much money should I be giving him for his 100,000 promissary note / investment ?
Is it worth giving away all the cashflow for a short period of time just to secure the deal. That leaves about 500$ for myself annually. Property has good reserve and ability to carry itself. In 2 or 3 years I can refinance and pull equity from other properties to pay our the investor and move on ?
Any help would be greatly appreciated ! Thanks guys !
Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
6y
What does he want?
Normal hard money rates might be anywhere from 10-12% and a couple of points. I see you're in Canada so you may have different lending rules than we do in the states
The rule is your investor comes first. That said, if the private investor is experienced and simply providing financing, s/he would have presented you with a set of terms (rate, duration, costs, etc). While they may request an assignment of rents as a means to guarantee they receive their repayment, they typically want only repayment of principal and interest.
If the investor's offer is more of a short-term partnership - i.e. they provide the purchase capital - and perhaps some rehab funding - then when you refinance or sell, you pay them out (principal, plus interest / profit percentage). In these situations, your agreement could see you making interest payments to the investor during make-ready and wile you stabilize the property. In private lending, the arrangement is whatever the parties negotiate (within the confines of the law)
@Taylor L. Private money is not the same as hard money. Additionally, U.S.A. style hard money lenders do not exist in Canada. We do have comparable entities in Mortgage Investment Corporations (MICs), but their operations are a little different (naturally as the legal and regulatory framework are different).