Found a great deal but I do not have enough capital

[Zach Fagas]

Hey everyone.  I found a deal here in St. Louis I am really interested in buying (6 units for 450k off market) but I do not have enough capital to buy it on my own.  I wanted to reach out to some friends that have money and see if they would be interested in partnering but I do not know how to structure the partnership.  Any suggestions?

[Jeff Copeland]

Your friends can either be equity partners (form an LLC and pool your resources. Your LLC's operating agreement will dictate how and when profits and capital gains get distributed).

Or they can offer you debt financing as a private lender. This blog post explains the financing process (which is essentially the same for bank financing, private money, or seller financing). 

[Account Closed]

Do you have a stock account? You can get a margin line of credit on 50% of the value of your portfolio. Those are usually around 3.5% interest. 

[Jay Hurst]

Quote from @Account Closed:

Do you have a stock account? You can get a margin line of credit on 50% of the value of your portfolio. Those are usually around 3.5% interest. 

 @Account Closed Just curious on what brokerage you are seeing 3.5% for current margin rates? 

[Erik Estrada]

Quote from @Zach Fagas:

Hey everyone.  I found a deal here in St. Louis I am really interested in buying (6 units for 450k off market) but I do not have enough capital to buy it on my own.  I wanted to reach out to some friends that have money and see if they would be interested in partnering but I do not know how to structure the partnership.  Any suggestions?

 Do you own any other investment properties? 

If you do, you can cross collateralize and come with little down on a private money loan. 

[Account Closed]

Quote from @Jay Hurst:

Quote from @Account Closed:

Do you have a stock account? You can get a margin line of credit on 50% of the value of your portfolio. Those are usually around 3.5% interest. 

 @Account Closed Just curious on what brokerage you are seeing 3.5% for current margin rates? 

 Interactive Brokers and Schwab 

[Henry Clark]

Are you single or married with no kids?  House hack it.  Your in real estate.  You can swing the deal yourself. 

Are you currently renting or own your home?  If you own your own home two consecutive years out of five you can sell with no taxes.  Talk with your cpa. Either way you can swing this deal. 

There won’t be enough meat on the bone if you pull several investors into a $450k investment. Plus you all have to have the same investment goals. 

[Eliott Elias]

Capital is the easy part, partner on the deal with someone who is willing to put up all the cash to close 

[Jay Thomas]

Quote from @Jeff Copeland:

Your friends can either be equity partners (form an LLC and pool your resources. Your LLC's operating agreement will dictate how and when profits and capital gains get distributed).

Or they can offer you debt financing as a private lender. This blog post explains the financing process (which is essentially the same for bank financing, private money, or seller financing). 

@Jeff Copeland what if the friend is only interested in funding the down payment as a debt partner? I have run into issues where someone is interested in funding the down payment and doesn't want to be an equity partner but the lender doesn't allow a second lien. How can someone navigate this situation?

[Jeff Copeland]

Quote from @Jay Thomas:

Quote from @Jeff Copeland:

Your friends can either be equity partners (form an LLC and pool your resources. Your LLC's operating agreement will dictate how and when profits and capital gains get distributed).

Or they can offer you debt financing as a private lender. This blog post explains the financing process (which is essentially the same for bank financing, private money, or seller financing). 

@Jeff Copeland what if the friend is only interested in funding the down payment as a debt partner? I have run into issues where someone is interested in funding the down payment and doesn't want to be an equity partner but the lender doesn't allow a second lien. How can someone navigate this situation?
 

 This would have to be worked out with the lender, based on why they have concerns or won't allow it. I would venture to guess in some cases it's because the buyer doesn't have any money, or enough cash reserves, rather than the fact there is a second position lien (as long as they are in first position, why would they care?)

[Joe S.]

Quote from @Erik Estrada:

Quote from @Zach Fagas:

Hey everyone.  I found a deal here in St. Louis I am really interested in buying (6 units for 450k off market) but I do not have enough capital to buy it on my own.  I wanted to reach out to some friends that have money and see if they would be interested in partnering but I do not know how to structure the partnership.  Any suggestions?

 Do you own any other investment properties? 

If you do, you can cross collateralize and come with little down on a private money loan. 

 On a cross collateralization do the properties have to be paid off or will there be a second Lien placed on them?

[Rob Sa]

Quote from @Jay Hurst:

Quote from @Account Closed:

Do you have a stock account? You can get a margin line of credit on 50% of the value of your portfolio. Those are usually around 3.5% interest. 

 @Account Closed Just curious on what brokerage you are seeing 3.5% for current margin rates? 

 I regularly use margin for various investment strategies i run and I have not seen 3.5% rates in the last 3 months. The best im getting now is about 5% using Interactive brokers.

[Jay Hurst]

Quote from @Rob Sa:

Quote from @Jay Hurst:

Quote from @Account Closed:

Do you have a stock account? You can get a margin line of credit on 50% of the value of your portfolio. Those are usually around 3.5% interest. 

 @Account Closed Just curious on what brokerage you are seeing 3.5% for current margin rates? 

 I regularly use margin for various investment strategies i run and I have not seen 3.5% rates in the last 3 months. The best im getting now is about 5% using Interactive brokers.

 agreed.  That is why I asked. 

[Chris Seveney]

Quote from @Zach Fagas:

Hey everyone.  I found a deal here in St. Louis I am really interested in buying (6 units for 450k off market) but I do not have enough capital to buy it on my own.  I wanted to reach out to some friends that have money and see if they would be interested in partnering but I do not know how to structure the partnership.  Any suggestions?

To actually answer the question. When you are looking to get friends and family involved doing it as a loan is challenging because there would be multiple lien positions. To bring everyones position equal they would want to either start a LLC to lend to you OR be equity partners in the deal. If they are passive only, then you would need to get an SEC exemption through Regulation D 506b. These docs would ccost around $10k to create. Better option would be to have everyone have ownership and voting rights but you still manage the day to day. In this instance you would need a LLC well crafted to outline all the terms. If you get the funds and need an attorney involved, happy to provide you with a contact.

[Stephanie P.]

@Zach Fagas

If you can get the seller to hold a 2nd to 90%, there are lenders that will go to 75% on a 6 unit with no DSCR component. PM me if you can make that work and I'll give you more details.

Stephanie

[Erik Estrada]

Quote from @Joe S.:

Quote from @Erik Estrada:

Quote from @Zach Fagas:

Hey everyone.  I found a deal here in St. Louis I am really interested in buying (6 units for 450k off market) but I do not have enough capital to buy it on my own.  I wanted to reach out to some friends that have money and see if they would be interested in partnering but I do not know how to structure the partnership.  Any suggestions?

 Do you own any other investment properties? 

If you do, you can cross collateralize and come with little down on a private money loan. 

 On a cross collateralization do the properties have to be paid off or will there be a second Lien placed on them?

They do not have to be paid off. Max CLTV cannot exceed 65% though.