Private Money Structuring - Apartments

3 Replies

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!

Steve Lyman

@Steve Lyman

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.

Hi Steve,

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.