Structuring Deal - Buy & Hold

2 Replies

So I am looking to complete my first deal and am in the search for a SFH. This would be the first house that I am purchasing and since I will not be living in it I will be unable to take advantage of an FHA loan. However, I have an investor who would be willing to lend me some money for the down payment so they can make a small return on on it.

This helps me out because I can stay more liquid and will help them out because they will be gaining a better rate than if the money is in a savings account etc.

Example:

$100K Property

$20k Total Downpayment

I put up $10k down, investor puts $10k down

Questions:

1. How could I structure the deal to give them a return?  They obviously would want their money back before 30 years.

2. What is a standard interest rate in this type of situation or investing in general?

2 Is this smart financially for me?  Currently have around a 110k net with around 70k being liquid.  I could afford the full down-payment but want to avoid it if possible.

Any advice would be appreciated, thanks

If you're comfortable with the cash flow and the deal, then the financials are fine.  It simply depends on if it fits your model.

As for how to structure the deal with the investor...there is no standard.  This type of deal can be as creative as you want it to be, since you're not an owner occupant.  (Dodd-Frank doesn't protect investors from themselves!!!)

Decide on a term and interest rate that works for you and your investor.  It's just a separate note.  It can be unsecured, secured by a junior position on the property, a personal guarantee, or secured by some other...completely separate real property.

So...if you want to say 3 years at 7%, secured by a junior position on the property, cool.  Whatever meets the needs & criteria for both you and your investor's goals.

Go forth & do!!!

okay, great - thank you!