Structuring Investor Funded Deals

[Kellen Driscoll]

Hey BP,

I am curious how other investors are structuring their deals with private money lenders in regards to multifamily apartment buildings. Do you give a flat interest rate on the money lended to you? If so, what is a typical interest rate you give? 

Do you give up a portion of equity and cashflow? If so, what portions make sense? 

What terms are you typically offering and how does the money flow back to your private investors?

I realize every deal is a little different, but I am just looking for some solid advice from individuals that have experience with this already. My situation is that I have 3 or 4 friends that want to invest with me, and with their money combined I am looking to purchase an apartment complex. I am unsure however on what terms to offer them in return for their money.

Thank you!

[Gino Barbaro]

@Kellen Driscoll

Hi Kellen 

I am struggling with this myself. We own all of our units, over 900 by ourselves.  We have been considering syndication the past year but have been blessed to be able to refi and repurpose the funds into the next deal.

I would listen to all the syndicators who have been on podcasts and have shared their model. I particularly like @bruce petersen model of 70/30 split, with ZERO fees, and everything split 70/30.  He has the credibility and track record to do that.  I am inclined to follow that model on our first deal.

Other syndicator splits: Grant Cardone 65/35, Vinney Chopra 60/40. These guys are rock stars and can command these splits.

Most syndicators give a preferred rate of return, around 8%.

If you have 3 or 4 friends, I would consider partnering with them, creating an LLC and an operating agreement. Try to keep your first deal as simple as possible. Start raising money now if you consider a syndication in the near future

Best

Gino