What should the rate be for my down payment investor.
Member since 2021 · 2 posts · 0 votes
Hello everyone, I'm currently looking into buying a property with my father as an investor for the DP and Closing Costs. At the moment we are getting close to closing on a home that costs $370k~ with 25% down. At the moment I am trying to figure out what a fair rate would be for my father investing his money, I want to treat him as if he was a non-related business partner. He has asked for a 5% return on his DP investment and a partial share in the monthly rent profit. I consider 5% pretty low, considering he could do better investing in the S&P 500. What do you guys believe is a fair return for an investor who provides the DP? Maybe a 10-15% on the DP amount and/or a 10-25% share of the rent profit?
Thank you for your time,
Daniel
Hello everyone, I'm currently looking into buying a property with my father as an investor for the DP and Closing Costs. At the moment we are getting close to closing on a home that costs $370k~ with 25% down. At the moment I am trying to figure out what a fair rate would be for my father investing his money, I want to treat him as if he was a non-related business partner. He has asked for a 5% return on his DP investment and a partial share in the monthly rent profit. I consider 5% pretty low, considering he could do better investing in the S&P 500. What do you guys believe is a fair return for an investor who provides the DP? Maybe a 10-15% on the DP amount and/or a 10-25% share of the rent profit?
Thank you for your time,
Daniel
I think 5% is fair considering he's also getting a share of the rent.
Hey @Jim Pellerin, thanks for your quick response! What do you think would be a good share of the rent? 25%?
@Daniel Spillane You are doing all the work, so 25% seems fair. You still keep the principle and appreciation. He's just a money guy.
Hello everyone, I'm currently looking into buying a property with my father as an investor for the DP and Closing Costs. At the moment we are getting close to closing on a home that costs $370k~ with 25% down. At the moment I am trying to figure out what a fair rate would be for my father investing his money, I want to treat him as if he was a non-related business partner. He has asked for a 5% return on his DP investment and a partial share in the monthly rent profit. I consider 5% pretty low, considering he could do better investing in the S&P 500. What do you guys believe is a fair return for an investor who provides the DP? Maybe a 10-15% on the DP amount and/or a 10-25% share of the rent profit?
Thank you for your time,
Daniel
I think 5% is fair considering he's also getting a share of the rent.
Hello everyone, I'm currently looking into buying a property with my father as an investor for the DP and Closing Costs. At the moment we are getting close to closing on a home that costs $370k~ with 25% down. At the moment I am trying to figure out what a fair rate would be for my father investing his money, I want to treat him as if he was a non-related business partner. He has asked for a 5% return on his DP investment and a partial share in the monthly rent profit. I consider 5% pretty low, considering he could do better investing in the S&P 500. What do you guys believe is a fair return for an investor who provides the DP? Maybe a 10-15% on the DP amount and/or a 10-25% share of the rent profit?
Thank you for your time,
Daniel
I think 5% is fair considering he's also getting a share of the rent.
Hey @Jim Pellerin, thanks for your quick response! What do you think would be a good share of the rent? 25%?
Hello everyone, I'm currently looking into buying a property with my father as an investor for the DP and Closing Costs. At the moment we are getting close to closing on a home that costs $370k~ with 25% down. At the moment I am trying to figure out what a fair rate would be for my father investing his money, I want to treat him as if he was a non-related business partner. He has asked for a 5% return on his DP investment and a partial share in the monthly rent profit. I consider 5% pretty low, considering he could do better investing in the S&P 500. What do you guys believe is a fair return for an investor who provides the DP? Maybe a 10-15% on the DP amount and/or a 10-25% share of the rent profit?
Thank you for your time,
Daniel
5% is fair...all the way. The only thing he's providing is the DP. You are responsible for:
1 - Finding the property
2 - Negotiating
3 - Closing
4 - The rest of the money needed
5 - Managing the property
6 - ...and the list goes on and on.
(1) If you’r using a PM it’s pry 6% plus 50% of rental profits AND appreciation? They are providing 100% of the money and taking 100% of the risk while you both do basically the same work (hopefully most none).
(2) If you’re doing the job of PM then same deal except you get 8% of rent before the 50/50 profit split?
Your dad could do either of these on his own (and pay a professional PM) and keep 100% of the profits. So he’s basically gifting you 50%. It’s an even bigger gift to you if you’re declaring the mortgage interest and depreciation against only your taxes.
He’d be better off just doing it himself and writing you a check for half the profits so he could take the tax write offs. But if I understand correctly he’s just trying to help you get started, and it’s cheaper than paying for college.
Hello everyone, I'm currently looking into buying a property with my father as an investor for the DP and Closing Costs. At the moment we are getting close to closing on a home that costs $370k~ with 25% down. At the moment I am trying to figure out what a fair rate would be for my father investing his money, I want to treat him as if he was a non-related business partner. He has asked for a 5% return on his DP investment and a partial share in the monthly rent profit. I consider 5% pretty low, considering he could do better investing in the S&P 500. What do you guys believe is a fair return for an investor who provides the DP? Maybe a 10-15% on the DP amount and/or a 10-25% share of the rent profit?
Thank you for your time,
Daniel
I think 5% is fair considering he's also getting a share of the rent.
Hey @Jim Pellerin, thanks for your quick response! What do you think would be a good share of the rent? 25%?
@Daniel Spillane You are doing all the work, so 25% seems fair. You still keep the principle and appreciation. He's just a money guy.