Hi BP community! My husband and I are newbie investors and I am recently licensed. We own 2 rental properties and are in the process of our first flip. We have an investor who has money to invest but no experience, and is interested in working with us. Our first meeting is this evening. I am in need of a little direction. What does a typical deal with an investor look like? At this point I'm not even sure either us or the investor knows what a fair offer is and how to go about coming up with a plan that works for both of us. Can you share in your experience, is it easier to pay a percentage monthly or share profits? How does the deal work differently when you are investing in rents vs flips? I appreciate all your feedback very much!
The first step is assessing where you both are currently at financially and experience wise and where you want to go.
You might want the money for a long term rental hold and the investor might want to do a hard money loan for a flip to make points and fees so they can get the money back out and grow it again.
There are some investors who want cash flow and others who want fast growth churning the money over and over with a value add project or loans etc.
I have found the numbers are important but the missing piece I see over and over is the investor more than anything wants the relationship and to have the trust there with their capital.
With both of you being inexperienced you definitely need an attorney helping with docs and what the possible structures might look like. Everyone is excited in the beginning but when things go wrong everyone points the finger at the other. That is when the signed documents come into play to separate what is fact or not.
Approach every property like it could not work out and what are the exits to get out clean if possible for both parties??
I see some investors have a little success and then think they replicate that easily for the next one and slack off on the process and then it comes back to bite them.
Good Luck Kelly,
I would be interested to here how your meeting goes. Please update us. My wife and I are contemplating the same exact situation. We are putting together an analysis of a flip and are then going to present to a potential investor.
I would start by asking what your investors goals are and what rate of return is he looking for. Long term short term, retirement, cash flow. One you know what he is looking for, you can look for investments that fit his needs.
Great advice! Thank you!
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