Private money partnerships or wraps
I’m curious what my BP fam would say about how I can either make this more attractive to a private lender, or is this pretty attractive and I just haven’t found the right type of lender?
I have a good friend that I have sold 3 houses to, he owns a construction company and does great work, is expensive but hey he can get it. He wants to buy a commercial building about 3 mins from his house so he can also have his assistant run his business as well as make it a used tire shop. He also does a lot with buying and selling cars so it could double as a small car lot too. He has an verbal agreement (I know it’s not written) to buy the place at 150-160,000 he has 25,000 for a down and about 30,000 to make the building ideal for his purpose. Small fix up, paint cosmetics, build a front office space, up grade some exterior features, signage and shop equipment.
I personally want to help him and am willing to put in 25,000 myself, and in order to complete the purchase he would need to borrow 100,000. So I thought let’s do a wrap mortgage.
He is asking for no payments for the first 3 months, so he can spend money on the building and make it ready for his use. His payments would be very low.
He has an excellent payment history with me for the past 14 months- paid better than agreed and paid the loan off early. It was supposed to be 46 months but ended up being 14 months.
He also has agreed (if needed) to put these two additional (different) properties up as collateral, seeing as their rent would pay the entire note payment.
Here is a quick breakdown
Investment from an mystery investor 100,000 +
20 year am, 6% balloon in 5 years
Investment from me 25,000
Investment from Him 25,000-35,000 (depending on purchase price of the building)
Additional 30,000 Spend from Him into the commercial building-
No payments for Him for first 3 months-
Balloon Payment from him OR refi on the 5 year term ( Flexible but is in our benefit to have interest accruing)
So it would be refinanced or paid off at or before 5 years. My caluations on the interest of the note would be a better cashflow then most local rental properties with no expenses, tenants or toilets. :)
Additional Collateral if needed - Plug your thoughts on values for each property but, shouldn't be below thses #'s
Rental property 1 (paid off) - 60,000 Rented 850 mo Ford is a 4 bedroom 2 bath-
Rental property 2 - 50,000 Rented 750 mo 2 bedroom
Shop- 150,000 + 30,000(value add)
Total Collateral- 260,000 + (30,000 Value add)
Our Loan to Him would be 125,000
And I would make This loan in an IRA so I can build my retirement account up,
So again is this pretty attractive and I just haven’t found the right type of lender?
Thanks