funding airbnb properties with OTM?

Question

Has anyone successfully bought multiple Airbnb-style properties using other people's money to include the down payment? If so, what was your strategy? Was it one investor or multiple? What does your return split look like etc...? Any information would be helpful. Thanks

Andrew B. · Answer

I recently was sent a deal by a prominent face here on BP doing exactly this. They basically were looking for a partner to bring the DP and the mortgage. They manage. Have some other terms in it but pretty straightforward. This is for a single partner. Others have started syndicating, which is a whole different animal. Let me know if you want the whole doc and I can send it over for reference via DM or email.

Curtis Eickenloff · Answer

When I said splitting equity, I should have said splitting ownership.  I look at it as my buy in to the partnership is money and theirs is finding the deal and doing all the work.  This type of partnership might not work for everyone but it works for me.  As long as I am getting a good cash on cash return, I do not care that they are getting half the property.  In my opinion, 50% of a good deal is better than 100% of no deal.

Curtis Eickenloff · Answer

@Ryan Moyer I am currently the money partner on 5 deals just like this.  To make it work the deal has to be very good and there needs to be a lot of confidence and trust in the people you are partnering with.  In the deals I am partnering on, I provided 100% of the funds to purchase the property.  The partners find the deal and do all the work to manage the properties.  We split profits, loses (if any) and equity 50/50.

Andrew B. · Answer

@Ryan Moyer Everyone has their comfort levels. Like @Curtis Eickenloff said, it is the buy-in to the partnership. Both parties benefit. One has experience and deals, the other has money. If everyone is happy with the arrangement, it really doesn't matter. I've looked at deals with both better and worse terms. As long as I get what I'm shooting for, and the risk isn't overly lopsided, then it is still a deal.

Spencer Gibson · Answer

@Ryan Moyer this is very common. finding deals and getting them all set up is sweat equity. I've done a ton of flips with a partnership structured this way. If someone has the time and capability to produce returns that said "money guy" feels is fair then it's a pretty fair deal all around IMO.

Spencer Gibson · Answer

sent you a DM

Ryan Moyer · Answer

Yea splitting equity is one thing. But that deal in the OP says they're splitting ownership interest, which I took to mean as the entire value of the property and not just the equity. Maybe I'm mistaken on that and "ownership interest" is actually meant to express equity.

Even on only equity, you're essentially paying half of your down payment to the manager by turning that equity over to them though, correct? Or is it only equity gained through appreciation and not the original equity created by the down payment?

Ryan Moyer · Answer

Good lord.  50% property ownership interest, not just equity?  So if you buy a $1m property the requestor instantly gets $500k in equity just for promising to manage it, and you instantly lose $500k out of the gates in addition to all the cash you put down?

That can't be right...

funding airbnb properties with OTM?

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