Apartment Syndications using hard money

[AJ Jordan]

As far as syndications go the big to do is to raise private money through passive investors like doctors lawyers etc. now what if I just used a hard money lender to cover the down payment and rehab followed by a refi obviously having a sponsor sign it with a bigger net worth than yourself. What are your thoughts? Would it work? Would it only work on certain deals maybe way below market value? Or is it simply because people just don’t want that high of an interest rate?

Thanks in advance!

[Charles LeMaire]

Where to start...  First, I would be rather hesitant to invest with a sponsor that asked "Would it work?".  I would like to think that he worked out the numbers!  Second, the raise is for the down payment etc.  The rest comes from a lending institution (agency, bank, etc.).  They will not loan that part if you are borrowing the down payment, such that you have no skin in the game.  Third, mentioned above, the rate on hard money would eat up a lot the profits - remember the proforma that you apparently didn't do.  

Personally, I am simply a passive investor in syndications (50 so far).  But I don't think raising the money is the hard part.  Finding a deal that works is a big part of winning in this arena. 

Regards,

Charles LeMaire