Is there a general rate of return to offer people when raising money for buy and hold real estate?

10 Replies

I'm talking raising money from people who are not traditional real estate investors.

People who just want a stable guaranteed return for their money from real estate, let's say over 10 years, but don't want to be hands on at all. And you're not offering equity.

What interest would you give them yearly? 

2%? 

5%? 

8%? 

15%? 

Even more?

Thats a very specific question followed by a very vague amount of information. What do you mean by stable and guaranteed? do you have another property with equity that would atleast match the amount of the loan that you could utilize as collateral to guarantee their investment? Would these investors be fronting the entire purchase? PI's are great but are almost always more expensive than a traditional loan. What is stopping you from obtaining a TL? 

Rob Anderson, Anderson Property Management LLC | [email protected]

I think anyone willing to take 2% doesn't know how to invest their money and I wouldn't want to take advantage of them like that.  If someone has a bank account earning 0.8%, then 2% might seem attractive, but then you could at least offer them 5 or 6%.

Dawn Anastasi, Core Properties, LLC | http://www.coreprop.biz | Podcast Guest on Show #29

Be careful with terms like "stable guaranteed return" when talking to people. Even with your life insurance policies that you buy with your lender as beneficiary, and the third party guarantee bond that you bought to implement your guarantee... I still wouldn't use the g.. word or your phrase. Private lender terms are all negotiable.

This is an interesting question! I think it depends on their other investments.  Right now the stock market is doing well, so unless the numbers are above 7% it does not make sense for me.   Of course when the market is NOT doing well...well....LOL...even though investors know better...it is hard not to react...

We offer all of our non equity investors 6 to 10% depending on the size of investment and the term.

Cool thanks for the interesting replies. Was thinking of proposing around 8%, and could start the talks from there.

@Account Closed  

  buy and hold properties depending on your market and return will dictate how much you can reasonably pay for capital... If your return is average say 10 to 12%  then you can't really offer that amount there would be nothing left for yourself..

private investors for long term buy and hold are best brought in on the equity side

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

Are you filing with SEC for this ? Are you pooling ? There are very specific rules of what you can and can't do for this. But if you are using the friends and family exception then I always lead with 'Do you have any lazy money sitting around ?'. That would get the converstation started. Then ask what is it earning now. Beat whatever answer you get and the deal is yours if you can provide return on the money and return of the money.

HTH,

Tapan Trivedi

@Jay Hinrichs

If you give away equity for buy-and-hold investing, do you know how that works for deciding when to sell? Is it just whoever has the majority stake decides that?

@Tapan Trivedi

Good points.

YOu create an LLC with investor and work out the details in the operating agreement its whatever you come up with.. you want to make sure you have a buy sell agreement and a method to dispose of assets in the event you can't agree on how to run the LLC

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

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