Private Money Pitch and Loan Structure

1 Reply

Hi All!

I plan to purchase a flip within the next few months. As I am just starting out in real estate (I own a duplex) I don't have the money to fund a deal in cash so I plan finance with a combination of private money ~30% and hard money ~70% or conventional depending on the property.

My long term strategy is a buy and hold for cash flow with some flips mixed in to fund Multi Units with the goal of leaving my job within 5 years. I've been broadcasting to anyone who will listen what my plan is and have garnered significant interest from friends/acquaintances /family who want to invest with me. I want to put together a package/pitch deck to send to these potential investors. Having the details written up will hopefully give the on the fence investors the confidence they need to move forward.

Does anyone have a template for structuring a private money deal that they would be willing to share? 

@Jon Graves personally, i wouldn't start out with friends and family in an investment deal, especially if you're new to it. sounds like a recipe for potentially ruined relationships to me, but that's your call entirely. If you choose to proceed this way, i would encourage you to set up an entity with these individuals to make sure it's all documented and ownership percentages are clearly stated. you dont want anyone to feel screwed in the end. Also consider who gets to call the shots. if you want to sell and the rest of your "team" doesnt... who wins that battle? Keep it simple while you're starting out and learning -- Just my 2-cents on this. 

As for lending -- it's totally going to be dependent on not only the people looking to borrow money (typically lenders will base their decisions off of ALL borrowers, and typically the rates and terms will be based on the weakest link), AND the property in-question. where is it physically located? what's the market like in that area? is it stabilized (tenants)? what expenses are you responsible for if-any on that property? how much is it cash-flowing? for more conventional financing, there's the added hurdle of income and documentation required from ALL borrowers, and usually conventional loans don't like entities. 

Some private and hard money lenders only care about equity. some private money lenders only care about cash flow of the property. rehab lenders may only care about the after-repair-value.

it sounds to me a little early to start talking about financing, but it definitely doesn't hurt to find out what options are available and how. If for sure you're looking into rehab, I would reach out to some rehab lenders and get a feel for their requirements. or to make your life a HELL of a lot easier, find a Broker who specializes in such loan-types. not all rehab lenders are created equal, and some will be better or worse depending on your specific needs. Broker will help you navigate. 

Best of luck!