I currently own several small multi-family properties with partners but want to expand. My partners are hesitant although the deals work and the numbers check out on several small properties I have in the works. Our local bank assured me that if I could come up with 10% down I'd have financing no problem. However, when I say I am flat broke, I am flat broke (personally, not my small company). All my assets are preforming but I don't want to take any cash out of the reserves to finance new acquisitions...
Does anybody know anyone who will make private loans so that I can finance down payments? I think that several of the deals have enough meat on the bone for this type of financing.
Also, helpful advice and tips from seasoned multifamily investors is always appreciated. I know some of you must have been in this situation before? Do I try to seek new partners? Or do I look for alternative financing?
@Matt McCourry I would look at doing a joint venture with someone where you get a share of the deal for doing the work while they put up the money. If your properties are performing then you have a track record you can point to and bring in a partner who wants to put their money to work.
@Joe Fairless @John Cohen I also think that may be the best way to go, learning to take great care and put OPM to work is something I have been great at so far. I am currently seeking any advice on how to structure larger deals with multiple partners; this is where it gets tricky for me.... How much equity do I ask for as my portion? Especially since my small company (just me, my assistant in the Philippines, and contractors) does all the leg work... Guys any advice on where to get info on this please let me know....
John, after reading your bio I hate to even tell you this, but currently I am looking at small duplexes that I would put offers in at around the $89 - $110k mark to achieve my desired cap rate. I also am in the middle of a direct mail campaign that lead me to an owner here in Myrtle Beach that wants to unload an 8 and a 6 unit, I am rounding up numbers for both of them currently.... I plan on doing another direct mail campaign next month marketing to just multifamily owners in the Myrtle Beach area, since this is where I want to focus....
I feel like I'm stuck in the classic "which comes first, the chicken or the egg" conundrum. Do I get a deal, then worry about financing, or do I make sure my financing is in place first???
I just had one of these small duplex deals that I mentioned above slip away because I couldn't convince my partners that this was an awesome deal, even though our previous deals are thriving and we almost have all of our original investment recouped!
@Matt McCourry First off I love the grit and determination. As far as structure, it really depends on investors you are sitting with. The ideal partner ship is 50/50 (1 guy puts in money other guy does all the work). These are not always the easiest to find. I did a classic syndication on my deal 80/20 equity split (investor gets 80, I get 20), I also took an acquisition fee, asset management fee, and have a performance hurdle in the deal to make the split go 60/40 (investor 60, me 40). There really isn't a wrong way to structure this, just get some feedback form the people you are talking to.
Keep getting at the Direct Mail, put them in contract and go out and sell them if you can fund them yourself or with investors. I have 2 really good friends down in Myrtle Beach so I love coming down there.
The chicken or the egg is always a question I get from people. The best answer is you want to toe the line of both at all times. Its easy if you can go to friends/family/etc and get them to put a check in a bank account for a deal (a lot harder then it sounds). You want to keep you investors engaged throughout the process, so when you get a deal you have the interested parties. 1 thing you may do is get a commitment letter signed by potential investors so you can keep them accountable.
Keep going and network with more people, build interest and ask for money lol. I think your doing a great job and love the work.
Does your small company have any equity in its current holdings that you could leverage?
@David Dachtera They do, thats why I originally went with commercial loans from a small local bank. However, they are pretty hesitant right now on doing that, but they always assure me that its an option in the future.... I think because I am young and only been at it a year and a half... I just barged in the vice president's office of my local branch yesterday and told him about a great deal that just slipped away because I couldn't find a 10% downpayment. He asked how I knew it was a great deal? I replied "because the numbers worked and one of the largest investors in town just put it under contract."
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