Using private money for Creative financing deals

[Alex Ng]

Subto has entry fees. I would like to use private lenders to cover these fees so I can scale higher. I know they can enter second lien position. However, how would it be structured? Would I pay the lender off over time? is there some type of balloon payment? How would I structure a lender to handle the entry fees?

[Jay Hinrichs]

Quote from @Tony Pellettieri:

Hey Alex,

We recently joined SubTo. It had a, what some may call, high entry fee in itself.

Private lenders as you probably already know lend on/against assets, opposed to your DTI, etc. You may find it difficult to obtain financing from private lenders due to the fact when utilizing SubTo, you don't actually hold title to the asset. Not saying with the proper structuring it can't be done, but there are usually more effective ways. Lender's typically offer the best terms when they can secure a senior/first position lien.

It may be more beneficial to find a partner, instead of a lender, who can help fund your acquisitions. A partner can bring valuable insight and creativity to a deal and help you see opportunities you may not have identified on your own.

Have you done any SubTo deals yet, or will this be your first?

when you buy subto you are taking title and like you point out getting second position money for the downpayment or equtiy .. ( entry fee new term kind of funny but I am guessing thats a Pace ism. )

I agree with you these folks need partners not loans.