Updated over 4 years ago on . Most recent reply
Advice on SFR financing offer
Hi everyone,I currently own a few SFRs in Michigan. I was approached by a startup backed by an institutional investor that offered me an interesting financing deal for investing together in new properties and I'm not sure if it's a good deal: - They will provide a very cheap hard money loan - 85% of the purchase + rehab price for 3% APR (so for a house I can buy for $100K + $30K rehab I get $110K at 3%)- They then provide guaranteed refinancing after the rehab covering 80% of the property at 4% (so assuming the value increased to $160K, I get $128K mortgage at 4%, essentially taking back most of the equity) - In return they want 40% of the property (so 40% of the net cash flow (after financing and operating costs) and 40% of the net value after the sale)I'd love to hear your thoughts - on one hand I will only need very little equity upfront and I'd be able to take back most of it (and maybe more if I get a good deal on the property), and the mechanism is easy, streamlined, and like an "auto pilot". On the other hand, I'd be giving up a significant portion of my upside. I'd love to hear your thoughts!