I am in the process of vetting a few different small apartment properties. That being said I have some private money lenders that are interested. My problem is, I don't know how to structure the loan.
To give you a few details, a 28-unit complex is listed for $850,000. Seller is asking for 25% down and is willing to do a LC, 7 year term amortized over 20 years. If I had one investor to give me $212,500, how should I structure repayment? Need more information?
Appreciate the help!
Break ownership up of the property, and thus the profits, by a 1,000 dollar increment, and have a simple math formula.
850,000 - 25% (212,500) = 637,500 (637.5 shares)
100/850= .11765% per share.
Owner with the 25% down gets 25% of the profit (obviously), and the rest of the owners split the remaining balance by .11765 * X, where X represents their numbers of shares (by the 1,000 USD they pay in).
Form the location as an LLC, and assign shares that way.
Thank you for the information. Have you done this in the past? Are there other options out there?
In order to make a suggestion I would need following information:
- A.Does property cash flow with given terms and down payment?
- B.If not, what has to be done to create a cash flow?
- C.How much time it will take to get property rehabbed.
- D.How much money.
- E.Who is going to manage the rehab and the property? If it is you, how much experience do you have?
What I am trying to determine is risk factor which also depends on your experience and what are you bringing to the table. With that information I could tell you few ways that the deal could be structured.