Seeking advice - Structuring a purchase with an investor

5 Replies

Hi Guys,

i have a property under my family entity,

Investors wants to buy-in on that specific property with agreed on terms (% annual return on equity invested & % of sale proceeds when due)

This specific entity holds other properties currently,

which type of agreement is best suited for this situation?

all "Investor agreements" I've came across claim % of ownership to the entity, in which in this case is holding other properties, i would want to avoid this scenario.

Is there a way to structure a way in which he invests capital in our entity in exchange for the agreed return without giving up or sharing ownership?

Thanks!

@Yehonatan Baran

Consider a mortgage or deed of trust with a sale participation clause on the single property. He has the right to % annually and the% on sale when due. 

Originally posted by @Carl Fischer :

@Yehonatan Baran

Consider a mortgage or deed of trust with a sale participation clause on the single property. He has the right to % annually and the% on sale when due. 

I have 50% of the purchase too 

Would DOT Scenario work well here?

@Yehonatan Baran I don't see why it wouldn't. Investor gives 50% day property is $100k investor gives $50k at 10% gets $5k each year and then you sell at $150k both get $75k. If this is in Florida it is a mortgage not a DOT

I have an office in cocoa beach maybe we can meet sometime and discuss thoughts on the local Re environment. 

@Carl Fischer I have a potential investor who asked about this same arrangement. Is this a common set up? To me 10% per year and also 50% if the sale proceeds seems like a great deal for the investor and not so good for me. Am I thinking about this wrong or missing something?

Hello All, 

My response is not so much about 'how to hold title' but to do with the split. What we are doing is setting up an LLC for each Private Investor being 50% down and our existing LLC being 50% owner.

What we are doing is that Private Investorbring the down payment of 20-25%, and we do ALL of the work. This is for buy-n-hold rentals. We then split 'cash flow'  and yearly 'tax losses' 50-50 which is not a huge number. The 'equity gain', either loan paydown or appreciation, is split 50-50 at the time of any cash out refinances or when we eventually sell. 

In my mind the Private Investor should EITHER (not both) get a 'yearly % ROI' (he is then a lender and not an investor) OR a portion of any yearly positive or negative cash flow and eventual equity upside. THEN they are an investor and not a lender.

Dan Dietz