How to Appeal to Investors??

Question

Hi there,

You always hear these guests on the BP podcasts coming in and saying they found the deal and someone else financed it. "If you find a great deal, somebody will pay for it!!" My question is, if I'm getting somebody to put in the 25% down payment on an investment property, how do I make the deal sweet for them and myself? How do they recoup their money? Who gets what percentage of the cash flow?

I apologize if there's info on this already on the sight, but I haven't learned to navigate the site yet...

Cheers!

Joshua Fulenwider · Answer

@Navid Aberg every partner and deal is going to be different.  Some partners may just want to loan you the money and receive interest only payments monthly or principal and interest monthly.  Someone else may not be in a hurry to get paid and will simply want a balloon payment in 6 months or longer.

If you are looking at partnering it is going to be up to you and the partner to set terms.  If this is your first deal or first deal with a new partner you may be asked to give up a greater percentage of the deal.  After you have established yourself you will be able to negotiate terms.  Whether the partner wants a split of the monthly cash flow or is interested in plowing it all back into another deal with you is something else to sort out.

Finding a partner or private lender can involve a lot of negotiation and the terms are only limited by the imagination of the parties involved.

Rick Pozos · Answer

First of all, it has to be a whopping good deal. THAT is very subjective.

Next, the person financing is usually not financing a down payment for you, they are financing the whole deal. In return they are getting hard money type of rates, 10-12% and maybe some points. This is not too bad since it is a whopping good deal.

If they are putting the whole down payment and the repair costs, they are going to get 50% of your deal. Cash flow would be split 50/50.

You have to have a network of friends who are in the business. Talk with your friends and find out what others are doing to meet these people with money or who want to partner. It takes lots of work to network with others. Get into several real estate investment groups or clubs. Oh, and it also costs plenty of money to be in the groups, take people to lunches and network.