Can you sell equity to fund a VERY unique deal without rent?

Can you sell equity to fund a VERY unique deal without rent?

Member since 2021 · 16 posts · 5 votes

Hi everyone, this may be (definitely is) a very strange question.... background: I'm a moderately experienced real estate investor (I own 9 single family homes and part of a mobile home park) 

I've come across a VERY unique property that I would love to buy as my primary residence, but frankly it's out of my price range.  It costs around 2 million to purchase and needs a couple hundred thousand to renovate....  However, it apparently cost 10 million to build back in the day, and it apparently couldn't be built for less than 15 million today, and would likely appreciate a lot after the renovations. 

I know this is outside the box, but is it possible to raise investor funding on a primary residence?  There would not be any short term cashflow rental income since I would be living there, but investors would participate in future appreciation after renovation at the time of a future sale (or future cash out refinance if I stayed in the property) as that upside could be substantial. 

Again, I'm fully aware this is strange, I'm just trying to be creative and find out if this is even possible?  I've personally invested heavily in an equity ownership stake in some ecommerce businesses that are just being created, and I'll only be paid years later once those businesses sell (either the whole business or part of the business), so I don't see why a similar investment model couldn't be followed in real estate....it just seems like such an outside the box idea so I'm wondering if anyone more experienced has seen or done something like this? 

Thanks everyone

Chad 

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  • Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    4y

    @Chad Maghielse, let's say that you raise the $2.2M and it's then worth $8M.

    My guess is you'll still want to do everything in your power to stay there and own it!

    So if raising $2.2M proves difficult, how will you go about raising your promised $8M to pay out your investors / partners (less your contribution)?

    ie. I reckon you need to determine before you buy what will be its outcome.

    At least, that's what I suspect any potential investor will demand (in writing).  Good luck...

  • Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    4y

    Maintenance on bigger homes like this is a BIGGER expense than normal.

    Larger roofs, crazy roof lines, multiple HVAC's, grande sized pool equipment, property tax increases.

    Plus  ongoing asset maintenance costs, such as mold forming in a veranda ceiling that needs to be removed and repainted, etc...

    That out of the way, if there are not a lot of takers for this place, could you do an OWC, or a Lowball.

    What I mean is there any scenario where you could step up to the plate on your own and buy it?

    Also look at the monthly bills for electric and heating....and if there is a pool(s) the water evaporation replacement costs.

    Does it have 100 year old chimneys that are unusable and crumbling, needing expensive scaffolding re-pointing or removal.

    I'm just pointing out there are LARGE dollar outlays beyond normal for these big Trophy Homes that it would be smart to budget for monthly.

    Do you intend to ride a lawnmower and cut the grass yourself or pay for it--etc...

    (If this seems negative--please don't take it that way--I'm rooting for you to get the house!)

    Good Luck!

  • Member since 2021 · 16 posts · 5 votes
    4y

    I appreciate the feedback guys, thank you.  Those are all good points.  I'm just exploring what possibilities might exist at this point.  

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