I have a free and clear rental property with a good timely paying tenant for the last 2 to 3 years. I am looking to borrow funds against this property while staying under a 70% loan to value. I want to offer a 10% return backed by the property. I would have all details worked out with an attorney. Conservatively and property is worth 120 K. Zillow estimates are 160. How can I advertise this property without violating any laws? Any help would be appreciated.
@Anthony Polcyn , if you're trying to extract equity, there are better ways to go about it. I would recommend a HELOC, Pen Fed Credit Union offers them on investment properties. Or you could just do a cash-out refi. Either way you'll get the money for way less than 10% interest.
What you're suggesting sounds like solicitation of a private security, which is covered by SEC laws. This is complicated, expensive to set up, and as restrictions on who could invest. My understanding is that if you want to advertise, you must follow rule 506 (c), which allows you to advertise, but limits you to accredited investors. *I'm not a securities lawyer*
If you do just one note and secure it with the property, you may be ok. Or there are other ways to structure so you stay out of the securities world. But def tread lightly. If you are getting more than one investor, then if they are not doing any of the work, then it will be considered a security.
I echo what Mauricio said. One investor/loan is okay--more than that, and it delves into the highly regulated world of securities offerings which it sounds like you dont want to get into. You may just want to find a private lender/investor.
Thank you for the responses. I will need private funds due to the fact that I rehabbed two properties that both have fell out of contract and I am in an pinch short term due to needing to use credit card debt to finish second rehab and lowering my scores too low to qualify. Weird spot to have 4 free and clear properties and having trouble covering debt. I will be in great shape again once the rehabs sell. Any tips on how to find private lenders would be greatly appreciated!
Be very careful to understand the difference between asking 1 investor for a loan and pooling funds from multiple investors. Read the two posts above this one.
In terms of finding a private investor to fun the full loan that you want, use your existing network. And reach out to people who attend a local REIA meeting.
Happy to make more suggestions. You just need to be really, really clear you are not looking for investors to invest in a deal. You are looking for an investor who wants to fund a loan. One investor.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing