Real Estate Agent · Cayce, SC · Member since 2014 · 79 posts · 42 votes
Hi everyone! I am fairly new to this type of Real Estate investing, as a career, even though I have been a builder and developer over the years. Obtaining money for projects of that sort most always goes through traditional lending institutions like banks and credit unions.
I have also dealt with private investors over the years for single family homes to large developments. As a result I am pretty aware of how to structure a deal for a flip or a partnership, in terms of returns and expectations.
My question revolves around private money for buy and hold properties. Specifically, how do I use investor money for something I want to eventually own exclusively, and provide a decent return. I have some ideas, but I'm interested in the experience of others. Look forward to the responses!
Aslo, I am in the Columbia, Lexington, Cayce areas of South Carolina and would love to put together a BP group! Please message or follow me if you are interested! Happy investing!
Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
10y
There are 2 basic options to put and leave money in the deal - equity and debt. Equity is a function of partnership, either democracy or limited. Investors who prefer partnership, do so because they want access to depreciation dollars and appreciation - they must be principals in order to benefit from either.
Debt partners are those interested in stable revenue stream via debt service, which is safer because the return is both collateralized, and contractual (note and mortgage/deed of trust).
As far as owning the asset individually, this involves buying partners/lenders out. This is possible, but you have to present the investment opportunity in a way which outlines how and when you will do this. Some people will like that, since they may like the notion of getting their money out within a specified time. Others may not like this, because allowing you to do this will inevitably give you the lion's share of the profits.
Different folks, different strokes. I've always been able to do what you are talking about, but it takes the right partner with interests complementing your own.
Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
10y
There are 2 basic options to put and leave money in the deal - equity and debt. Equity is a function of partnership, either democracy or limited. Investors who prefer partnership, do so because they want access to depreciation dollars and appreciation - they must be principals in order to benefit from either.
Debt partners are those interested in stable revenue stream via debt service, which is safer because the return is both collateralized, and contractual (note and mortgage/deed of trust).
As far as owning the asset individually, this involves buying partners/lenders out. This is possible, but you have to present the investment opportunity in a way which outlines how and when you will do this. Some people will like that, since they may like the notion of getting their money out within a specified time. Others may not like this, because allowing you to do this will inevitably give you the lion's share of the profits.
Different folks, different strokes. I've always been able to do what you are talking about, but it takes the right partner with interests complementing your own.
As far as owning the asset individually, this involves buying partners/lenders out. This is possible, but you have to present the investment opportunity in a way which outlines how and when you will do this. Some people will like that, since they may like the notion of getting their money out within a specified time. Others may not like this, because allowing you to do this will inevitably give you the lion's share of the profits.
Hey Ben! Thanks for that response. It is right along the lines of my thinking and backs up my assumptions. So, maybe offering the cash on cash return for a period of time until a specific return goal is met would be one way to present the opportunity?
As far as owning the asset individually, this involves buying partners/lenders out. This is possible, but you have to present the investment opportunity in a way which outlines how and when you will do this. Some people will like that, since they may like the notion of getting their money out within a specified time. Others may not like this, because allowing you to do this will inevitably give you the lion's share of the profits.
Hey Ben! Thanks for that response. It is right along the lines of my thinking and backs up my assumptions. So, maybe offering the cash on cash return for a period of time until a specific return goal is met would be one way to present the opportunity?
You need to be careful, because SEC is specific as to what you can and cannot do. Be sure to deal with accredited people, whom you know personally.
COC is rather basic. Sophisticated investors look at IRR. A decent IRR is not possible without a strong back-end waterfall to the investor, therefore you are not getting anyone aggressive without giving away substantive equity one way or the other. This leaves investors more interested in preserving wealth and guaranteed annuity-like CF. They are out there...
Real Estate Agent · Cayce, SC · Member since 2014 · 79 posts · 42 votes
10y
All of which makes me think I should use my own money on holds and investor money on flips. I have some cash for holds. I am writing my Operating Agreement which i will have reviewed by a local atty, but it seems much easier to stick to more traditional avenues.
As far as owning the asset individually, this involves buying partners/lenders out. This is possible, but you have to present the investment opportunity in a way which outlines how and when you will do this. Some people will like that, since they may like the notion of getting their money out within a specified time. Others may not like this, because allowing you to do this will inevitably give you the lion's share of the profits.
Hey Ben! Thanks for that response. It is right along the lines of my thinking and backs up my assumptions. So, maybe offering the cash on cash return for a period of time until a specific return goal is met would be one way to present the opportunity?
You need to be careful, because SEC is specific as to what you can and cannot do. Be sure to deal with accredited people, whom you know personally.
COC is rather basic. Sophisticated investors look at IRR. A decent IRR is not possible without a strong back-end waterfall to the investor, therefore you are not getting anyone aggressive without giving away substantive equity one way or the other. This leaves investors more interested in preserving wealth and guaranteed annuity-like CF. They are out there...
Every state has their own state specific SEC rules (called "Blue Sky"). Some states have diminicus statutes which in Latin means something like if it's "not that important don't worry about it." Probably depends on the state that you are in for the specific rules.