need to raise $50,000 to purchase a 26 unit apartment complex

35 Replies

I am caught in a predicament and am looking for ways to solve it. I have a deal that I have been working on since May and I am getting a little closer to making it happen. We have had to get creative with the deal because I did not have the money to put down a down payment on the place. Without going too deep in to the details of the deal, I need to get about $50,000 of my own money to help make the deal happen. Like I said, I don't have it to put up so my question is "what would be the best way to try to raise the $50,000?" I was thinking the best way was if I could get a personal loan from someone and pay them back plus the interest. 

Any ideas or solutions that anyone could think of would be appreciated.  

Dana, first I would ask this:

Is this deal worth it if you have to borrow the down payment of $50,000? 

You may be trying too hard to make this deal work. And if for some reason this deal is unsuccessful, how would you pay back the $50,000. Usually deals where you need to invest your last penny are not good deals to make. 

@Sathish Sekar

I think it is a good deal and worth purchasing. It currently clears over $120,000 per year. The reason it seems I am investing my last penny is because I don't have many pennies to begin with. I currently manage the apartments that I am trying to buy and I don't get paid much. I would love to start investing in more Real Estate once I have the Cash-flow from this business but this deal was just handed to me because I Manage the complex. 

Now the big question you brought up would be the payment back on the $50,000 if the business were to go South. Nobody plans on that happening when they purchase a business but I do understand your point on that part. So, that would be another question I have. "If I don't really have any thing to back me except the business I am buying with the $50,000, are there any other ways to go about getting it?"

If the deal is good even with borrowing the funds, then go for it.

Refinance your house.
Home equity line on your house.
Sell something expensive (even your house if the deal is good enough)
Put it on the Credit Card (works wonders, IF you're sure of your numbers:)
Call everyone in your phone contacts and tell them you have a $50,000 opportunity you'd like to tell them about.
Ask everyone in your contacts who they would be talking to if they had a $50,000 opportunity.
Put a post on facebook or your social sphere of choice that you have a $50,000 opportunity for the right person.
Call several local Realtors, specifically ones that do investments and commercial and ask hem if they're interested in a $50,000 opportunity and ask them who might be.
Borrow against other investments like stock or borrow from your 401k
Borrow from another investors 401k, your Mom's, your neighbors.  Their house equity is a great too. 
Ask for an advance from your boss, or borrow from their 401k, house, boat, etc.
Talk to your kids teacher about it.
Ask a hard money lender.
Ask the seller to carry that much (or that much more.)
Call Grandma. That uncle who has money, or that Aunt that always knew you could do it.
Personal loan from the bank, or the junk credit card offers.
Put your vehicle up for collateral.

Try all those things... after you're sure it's a good deal.

@Tyler Bobo

Thanks for your ideas. While I don't have the ability to do most of those things, I do understand what you are trying to say. There is money somewhere that I can try to find. I know I don't have anyways to get the money from anything that belongs to me but I will have to find someone else to borrow the money from. The bad thing is even if I find someone or multiple people to come up with the money, then I really don't have anything else to back me paying it back besides the business itself. But thank you for taking the time to help me out. I really appreciate it.

Is the seller financing the purchase and $50k is the down? If so you just need a partner if you can't get a loan for it.. If the deal is good you should be able to pitch it to partners, with you bringing the deal and management, and the partner bringing the $50k.  You can split the ownership and profits in a way that makes since to both (or all) partners, because part of a good deal is a lot better than none of a good deal.  
     If the deal isn't owner finance, then maybe  a little more details on the deal would spur more ideas from people.

@Tyler Bobo

I will be getting 40% from the bank and the rest will be owner financed. the $50,000 is a down payment directly from me on the owner financed 60%. It may sound a little odd but the seller would like to get at least 50,000 directly from me so I have something, even though it's only 6% of deal, in the deal. I think he wants it as a symbol that i'm invested more than anything. I guess it makes him feel like I won't just walk away if I already have some of my own money invested in it instead of just the banks money. (I'm thinking the next question would be, aren't you putting a down payment for the 40% from the bank? No, they will be signing the business over to me before the deal so I can borrow the 40% from the bank.) 

@Dane Delatte   Just checking, have you already spoken to the bank and received an approval on this scenario?  I'm surprised they would approve it with only 5% of your money into deal.

Do you have money for closing, and reserves?  Obviously you don't want to close and then have 3 tenants right off the bat that aren't paying and you have to start evictions.  Or realize with the change in ownership you have to bring items up to code (my state requires a walk through from the fire marshal - I remember just updating smoke detectors to hard wired, and putting in fire rated doors cost me a few thousand, on a 5 unit place).

@Tom S.

1) The tenant situation should be no problem. I am the manager of the apartment complex that I'm trying to purchase. I have already talked to the legal representation I had to talk to just in case I would have problems with that part. 

2) My best friend is a commercial lender himself and has drawn up the deal where he thinks the bank won't turn it down. He said his bank would not flinch at doing it if they could but the complex is not in their zoning. Some bank term I'm not familiar with called "Red-lining". I not 100% sure what it is but he said they would definitely do it if they could. He has some calls in to other banks as of now, but of coarse, I would only need the $50,000 once the bank has approved the 40% of the value loan. 

If the property clears $120k a year coming up with $50k should be doable either from a private lender, or a partner.  A few years ago I had sit down meetings with 2 people a month about investing in my deals.  I had a good track record and funding was my hold up. Just 2 a month and I ended up investing over $420k of private peoples money into my local small projects.  I know that's not a ton for some of the folks on here but I was no expert at talking to people either. Some of them were almost strangers and I just sat over coffee and explained what I was doing and why it was a good deal. Do that once a week or once a day and you'll find someone who's got some cash sitting in a shoe box or some low yielding Wall Street garbage that likes what you have to say.

If this deal is such a good deal, give part of it away for the 50k!!! 80% or 75% of something is so much better than 100% of nothing.That would be my advice to anyone out there in this type of situation.

When you come across a great deal, you do what you need to do to get it done. Sometimes that means charging up credit cards, asking family, selling stuff, loan against retirement and all those items already mentioned above. 

What I really cant believe is that @Dane Delatte has no information on their profile after 6+ months, no pic, no colleagues and is asking for 50k from strangers. This person refuses any advice and is fixated on a LOAN for 50k. It sounds like someone is about to lose 50k to a scam.

Am I being too cynical??

It won't get you all the way there, but if you close after the first of the month you may be able to get prorated rents. For example if you are collecting $20,000 a month in gross rents and close on the second of the month you would get credited 29/30 of$20,000 which would go a long way towards your 50k that you need.

Originally posted by @Rick Pozos :

If this deal is such a good deal, give part of it away for the 50k!!! 80% or 75% of something is so much better than 100% of nothing.That would be my advice to anyone out there in this type of situation.

When you come across a great deal, you do what you need to do to get it done. Sometimes that means charging up credit cards, asking family, selling stuff, loan against retirement and all those items already mentioned above. 

What I really cant believe is that @Dane Delatte has no information on their profile after 6+ months, no pic, no colleagues and is asking for 50k from strangers. This person refuses any advice and is fixated on a LOAN for 50k. It sounds like someone is about to lose 50k to a scam.

Am I being too cynical??

Cynical? No. You sound like most people who have cash to invest when vetting deals. All good points above. 

@Rick Pozos Not sure where that came from. I have posted numerous topics on this website and asked many of questions. I have also taken all the information I have received and internalized so I can use it. I am new to this and the only reason I am asking for feed back is because this deal basically fell in my lap because I have been working for the Owner for 6 years and he would love to sell me this place. I wasn't specially asking people to just hand out money to me. I do want to thank you for the information of splitting a percentage of the business. I'm trying to find the best solution to go about trying to get the money since I am new at this and trying to learn how the investing side works.

@Brandon C Johnson I don't have great credit.  It is somewhere in the mid 600's. That is why my friend had to get creative with the way he structured the bank loan being 40% value and owner financing the rest. I will message you though. Thank you for your time.

@Eric M. Right now we charge only weekly rates so i wouldn't be getting big monthly sums at first. The complex is located in an area in Ascension Parish where there are around 70 chemical plants. The apartments try to cater to the out of town workers that come to town for periods at a time to work in the plants. I am not saying I wouldn't try to change to a monthly rate, but that would be what I would be taking over. But thank you for the idea and I really do appreciate all the advice contrary to @Rick Pozos beliefs.  

As mentioned above I think giving away an equity stake in the deal is the best way to go. If it is truly a deal someone should be happy to earn a return on their 50k.  If you have a good relationship with the owner, maybe he/she would be willing get creative with giving him the 50k.  Maybe you put down 25k and finance the rest.  You could also offer to pay higher interest on the seller financing for less money down. 

@Dane Delatte people don't loan people who they don't "know, like or trust". Got that from @Dan Handford  ... but it's so true. So with that being said the only people considering the inexperience comes into play, the closest you can get to people who "know, like or trust" you will be your family members. If not then you have to go out there and build relationships. Truth of the matter is, people don't invest in deals. People invest in other people. Going this route building up a track record may take some time. My quickest advice for you, would be go to all of your local REIAs and see if you can network to find a partner who can help you take down this deal. I know one thing for sure, it won't magically appear in your lap

@Tj Hines Thank you for the information. But, I think the Question was misunderstood. That may be because I did not do a great job of asking it. I am not asking for someone on here that I have never talked to, to just hand money to me. That is not all what I was trying to ask. I would not expect someone that I have never met and have never talked to to give me money. Neither do I expect anyone to take the risk of loaning money to me when they don't know any of the numbers of the business as someone stated above that I may be trying to scam people.

My main question was, what is the normal in the real estate world when someone may loan money to an individual to make a purchase? would it be normal for me just to pay that person back with interest or is it the norm for that person to take a percentage of the company?

If the deal was in Empire City, Uncle Max might front you the money.

(and those who understand what that means probably don't need it).

Good Luck!

@Dane Delatte   Regarding your question of % interest or % equity for a loan, it's whatever the person lending desires. I've found most people (IMO) prefer monthly cash payments with interest to get the funds back.

This sounds like an interesting deal if you can get all the parts to come together.  Good luck and keep us posted!

Yes "normal" is elusive.  Only thing normal or consistent in a good deal is that it's a win for both lender and borrower, but that can look like anything.  If you go to a hard money lender or some sort of professional investor they'll tell you what they like and want out of the deal to make it a win for them.  If you're approaching private money like friends/family/coworkers that like you (these are my favorite go to lenders) I present them the opportunity how I like to see it, which is a favorable win for me, and let them know that terms are flexible so to not shoot the deal down because of one sticking point.  For a lot of my projects I like to have a longer term loan paid back monthly with interest, just like a more traditional mortgage, but higher interest to make it work for my lenders.  Sometimes I get the payment I want by amortizing it longer, with a shorter call so they know they'll have it back.  Once I wasn't sure if I'd have it sold or back to them in time and didn't want to lose it if I couldn't, so I had a shorter more favorable interest rate, with the intention of paying it off, and if I didn't in x amount of time the interest rate jumped a LOT.  That time has came and went, and I didn't get it paid off, so I'm paying a high interest rate instead of a low one, and the lender is fine with not having his money back because at least now it's earning a solid return instead of a low one, and the property was good enough deal for me that the higher interest is fine.
     On another one I think I could've found the money even if it was hard money for the project, but a private lender I'd borrowed from a couple times wanted to get his feet wet on a rehab after seeing me do several with his money, and I had a good one under contract.  He brought the cash, and is doing all the labor, and we're splitting the profit.  So he's having a good time doing the project, will make a great return in 3-4 months, learn a lot, and I'll make a solid pay day with almost none of my money for sharing the deal.  

     So there's no normal, there's a million ways to structure a deal.

I was in the same situation in 2011 as you are in now (except it was for a SFH, not an apartment complex). I wasn't even in the market for a property, when my friend in Phoenix called me and said "Don ... you have to put in an offer on my rental property. The bank took it back and will offer it for sale as a short sale." This was after the bubble popped. My friend bought the house for $220k or so, then took out more equity as it went up in value and then couldn't make the payments so the bank foreclosed.

I asked him how much, and he said put in an offer to $60 k to the bank.  I laughed ... this was a $280k house at the peak.  No way they would take $60k.  Plus I didn't have that kind of money for a cash offer.  All I had was $10k in savings.  He convinced me to put in an offer, so I did and forgot about it.  A few months later, my real estate agent called me and said the bank accepted my offer.  I was ecstatic!  

After the ecstasy wore off ...  I thought how I could come up with the other $50k.  Luckily I have good credit and a multiple good credit lines on credit cards at the time (over $150k), so I took out $50k in cash advances, and had the $60k so bought the house for cash.   I put all of the rent towards paying off CC's and it has now paid off the CC's and paid for itself several times over (and the house is now worth $320k). 

If its a good deal you will find a way!!! 

Regards,

Don