Whats a fair offer to potential investors

Member since 2024 · 6 posts · 2 votes

What would be a fair offer on an interest only loan for potential investors? I'm looking to buy a second property but don't think I would qualify for a mortgage being that I have one rental property that does not cash flow at the moment. I have some cash saved up and I'm thinking to buy a cheap fixer upper and would look to see if I can grab a few investors to make it worth their time. If I were to get four investors to put in say $25,000 each, what would be a fair offer to them if I were looking to pay interest only for say 2 years? Just trying to get ideas on how creative financing works

0 Reply

20 views

Most Popular Reply

Brian Cauldwell

Lender · Springfield, MO · Member since 2023 · 104 posts · 78 votes

If you have the cash yourself you could get a DSCR fix and flip loan. They do not care about DTI which looks to be your concern.

2 Reply

See this reply in the discussion

6 Replies

Jump to latestLatest

Sort by

Brian Cauldwell
Lender · Springfield, MO · Member since 2023 · 104 posts · 78 votes
1y
If you have the cash yourself you could get a DSCR fix and flip loan. They do not care about DTI which looks to be your concern.
2 Reply
Erik Quinson
Lender · New York City, NY · Member since 2016 · 26 posts · 9 votes
1y
Pawley,
In my opinion, the question around what would be fair to your investors depends largely on a couple of different things:
- How much time/energy will they put into the project or will they just have money in the deal?
- What kind of property are they investing in? If the project is a more vanilla, long term rental play, then a lower return on investment can be expected. On the other hand, if you are considering a fix and flip deal with higher risk, then I would expect your investors to receive a higher return.
You can offer upside in the profits from the deal on a pure % ownership basis, i.e. each investor owns 25% of the project, there is $100 of profit, everyone gets $25. Alternatively, you could offer them an annualized return of say 10% on their money that could be paid quarterly, semi-annually, at the end of the project or any other timeline you and they are comfortable with.
Hope this is helpful!
0 Reply
Brian TeeterBusiness Member
Little Rock, AR · Member since 2021 · 75 posts · 64 votes
1y
I have my own portfolio and also partner with others on other portfolios. My recommendation is to try and do as much as you can on your own. Partnerships can be very difficult to manage and there is so much that can go wrong (resentments, too many chiefs, too many cooks in the kitchen, etc). Partnering is a marriage of sorts... So choose wisely.
I agree with Brian C (above). Look into a DSCR loan. You might look up Aaron Chapman https://aaronchapman.com/ I refer a lot of my Little Rock, Arkansas and Memphis TN clients to him. He works nation wide.
501-951-7100
Turnkey Property Management4.8170 Reviews
View Page
1 Reply
- Jay HinrichsBusiness Member
  Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
  1y
  Quote from @Brian Teeter:
  
  I have my own portfolio and also partner with others on other portfolios. My recommendation is to try and do as much as you can on your own. Partnerships can be very difficult to manage and there is so much that can go wrong (resentments, too many chiefs, too many cooks in the kitchen, etc). Partnering is a marriage of sorts... So choose wisely.
  I agree with Brian C (above). Look into a DSCR loan. You might look up Aaron Chapman https://aaronchapman.com/ I refer a lot of my Little Rock, Arkansas and Memphis TN clients to him. He works nation wide.
  
  especially this small time type deal this is a friends and family type arrangement
  Podcast Guest on Show #222
  JLH Capital Partners51 Review
  Website View Page
  0 Reply
Andrew Zamboroski
Lender · Member since 2021 · 495 posts · 130 votes
1y
Quote from @Pawley Golfer:

What would be a fair offer on an interest only loan for potential investors? I'm looking to buy a second property but don't think I would qualify for a mortgage being that I have one rental property that does not cash flow at the moment. I have some cash saved up and I'm thinking to buy a cheap fixer upper and would look to see if I can grab a few investors to make it worth their time. If I were to get four investors to put in say $25,000 each, what would be a fair offer to them if I were looking to pay interest only for say 2 years? Just trying to get ideas on how creative financing works
Partnerships can be tricky. I think it may be easiest if you do go that route, to agree on an ownership split.

Hoqever, a DSCR loan may work if property is rent ready. Otherwise a tix and flip loan initially. Happy to give you an overview of those if you want to connect.
0 Reply
Mike Klarman
Specialist · NJ · Member since 2022 · 1k+ posts · 650 votes
1y
So, you need to think what the opportunity cost is for these potential investors. They can give you the money or safely make at least 10% - 12% in a mutual fund.
I worked out a private money deal for myself. We landed on 12%. 1% per month plus 1% origination. 100% funding on purchase and rehab.
This is important to note:
The BRRRR can work, even if the rehab period doesn't go well and you wind up being in for more money than you wanted and the cashflow right now is not there. You can recover from that over time. In 5 years, value has increased 15% - 20%, rent has gone up 10%. You now are above water in the property, but it took time.
But when you flip. You are speculating in the spot market. Very high risk. The spot market is volatile to its x-factors: Economy, Inventory, Interest Rate Adjustments, buying power of the ppl. If you try to flip in the spot market by buying on market and rehabbing an asset with a capped ARV given the location, you will lose. The ppl who flip for a living, they can control the project costs so that they are 65% or less of the ARV in Project cost. They buy in cash usig their own funds or private money, and they only buy when the cash is giving them a steep discount. They control their own rehabs, no GC. Hire and manage the subs, the process. They can get rehabs done for less. If you are not flipping like that and constantly in the low 60ish% on project cost, you will lose eventually.
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.