Creative lending deal for a 6-plex property

[David Holmes]

Hey guys, I a considering a real estate deal, and I wanted to see if any of you have had experience investing in a multi-family (this is a 6-plex) property as part of an investor/lender group.  I am basically one of 6-8 people considering investing (lending) money to another guy who is purchasing the property.  The property is being purchased for $575k and the purchaser is looking to raise enough case to pay for the property in full upfront— I may just have a small share of $30k.  I have been offered a 5-year deal in which I receive a 10% dividend each year ($750 paid out quarterly) and a balloon at the end of year 5 that brings my $30k investment up to $48,900.    The purchaser of the property intends to slowly renovate this property and sell them as individual units around year 5.  (Seems like a large task for him to live up to).  To be clear, I will not have ownership in the property… I am basically just lending money and getting a dividend in return. 

1. I want to make sure I am protected in this deal, if I were to go through with it. I would want to put something in place like a promissory note and deed of trust that protects me if the property goes south in the next 5 years and the borrower isn’t able to fulfill his obligations.  Have you had any experience creating these documents?  Any good resources to use?

2.  Has anyone experienced a lending deal like this and what are some things to ask/look out for here?  

[Cory King]

I can help. You're structuring a syndication and there's for sure steps to go through to protect all limited partners (that's you). 

Definitely sounds like an interesting play to condo each of them out and sell individually.

I just structured a duplex purchase with a partner, but we intend to keep it and split the profits. Happy to chat.