How Would You Structure This Deal?? --> 1st home conversion
Seeking advice for a friend --> His bro just bought a 2nd home, and he's talking to his bro about keeping his 1st home and converting it to a rental property. My friend would like to invest in the 1st home.
How Would You *Simply* Structure It?
My Thoughts:
- Make it a hybrid debt / equity vehicle
- Provide XX capital upfront, which entitles him to:
- XX% of NOI (and mutually agree to definition)
- XX% of sale proceeds after mortgage paid off
- For any major capital calls (new roof, siding, etc), contribute XX%
- Original property owner keeps name on title and mortgage (no change)
- No 2nd lien on property
- NOTE: It's like a note investment, but because there's unlimited upside since it's % based and not capped, the increased risk that comes with it is that there's no asset-based guarantee via a 2nd lien