All Forum Posts by: Account Closed

If you can secure it, a business loan could be a viable alternative.  Just make sure you are clear on the terms and what is and isn't allowed.  Raising private capital is probably more sustainable in the long run, but most of the return will go to the investors so you will likely be working on pretty thin margins.

Find some local lenders, (HML's or otherwise) and interview them. Once you have names, throw them out here as someone else has probably done business with them. Good luck.

Depending on how long you are projecting for development, you might look at a hard money lender for construction and then finance them out post-completion.  With only a month until closing, bank financing will be tough.  With more time, you should be able to find a more conventional lender to provide temp to perm financing which would cover construction (temp) and then convert to permanent financing upon stabilization.

Preferred return is typically calculated as a percentage of the equity invested.  Let's say you raise $1,000,000 and pay an 8% preferred return (for our example, let's use simple interest instead of compounded, although compounded would be more common).  Each year, equity would get the first $80,000 in cash flow.  Any additional CF would be handled per the terms of the partnership agreement (distributed, held for future use, etc.)  If there is a short fall, the preferred return would accrue until it can be paid.  Typically, all accrued pref and invested capital gets paid back before any profit splits.

Your options are to pay off the 2nd, refinance the 2nd, or refinance the 1st and roll in the 2nd.  You always have the option to bring more cash to the table if the property doesn't appraise high enough.  Once you have your quotes, you can run the numbers and decide if it is worth it.

What is fair is what will sell.  As a sponsor, I would think I am worth more than 20%.  However, most investors will also want to see some type of guaranteed return before I participate.  You might look at an 8-10% preferred return to the equity before sponsor gets anything, and then a 60/40 split of profits.  a 1% acquisition fee is common, as is an asset management fee.  The asset management fee can be a set price/year, but is more commonly a percentage of value.  You could also set it up as a property management fee where you charge a percentage of income or revenue.  Just run the various analyses and make sure you're comfortable looking someone in the eye and telling them you believe it is a good deal.

I agree with @Michele B.  The loan is an asset of your mother's just like anything else.  If not covered explicitly in her will, it will likely be addressed in probate (depending on the laws in her state or residence).

Hire an attorney.  If the property was in Texas, at a minimum, you would want a promissory note and a deed of trust.  I believe NC is the same, but you need to check.  In addition to the terms, there are several other issues to consider that a one page document won't cover.  Plan for the worst, hope for the best.

HMLs and/or private lenders can usually move fast.  (I once closed a loan in two days).  You are looking for an asset based loan, so credit, while important, is not as critical as security in the asset.

Put an offer in writing so the seller can provide to the lender.  Copy the lender if you have their contact info.  If they are willing, they will let you know.