All Forum Posts by: Account Closed

Form a partnership or LLC and let that entity buy the property.

If you're 90 days out from maturity on the 1st, your primary goal needs to be refinancing out of that piece, even if it means leaving your $30K in.  

Going the hard money route, expect to pay 8-14% interest and 2 to 3 points.  If you have a more creative lender, you can structure it any way you want, including a lower interest rate with a profit kicker on sale.  Some lenders will trade a little interest income in exchange for some of the ups.  Benefit to you is a lower base cost of capital/managed risk.  Downside is, you knock it out of the park and write your lender a big check (and end up feeling like you left money on the table).

70% ARV is fairly typical. What is the $3K for? It should be expected that you will fund some of the closing costs and be able to show you have adequate reserves for the project. If the $3K is a fee, then you need to calculate that into the overall cost of the loan. I would be weary of giving any lender cash up front.

Depending on your experience level and sales ability, you could form a limited partnership and raise the money.  As the general partner/operator, you can make your money through fees and sweat equity.  Depending on the type of financing and your financial strength, you may have to bring someone in beside you to guaranty the loan (assuming you can't find a non-recourse loan)

There are plenty of legitimate private lenders and hard money lenders out there.  Just do your due diligence.  I would recommend researching/interviewing lenders before you get a property under contract.

Morbid, but obituaries...

It depends on how you structure it.  If they are investing with you, you could form a partnership for each deal, where you serve as general partner and control day-to-day operations while your limited partners (investors) provide the capital.  One possible structure would be for the LPs to receive a preferred return, and then any residual profits would be split between the GP (you) and the LPs.  Of course, you can also invest on the LP side of things as well.  As a starting point, you might start with an 8-10% pref and then a profit split in the neighborhood of 60/40.  As Rodney aludes, there are rules to this kind of thing, especially if you raise money from non-accredited investors.

Another option is for them to come in as your lender and just pay them a set percentage on the loan.

The obvious question - is it a 20% return on investment ($10,000) or a 20% preferred return ($50K x 20% = $10,000 / 12 months x 3 months = $2500).  If you are earning a 20% preferred return only and it is only going to be out 3 months, you have to ask if $2500 is worth putting your $50K at risk.

I am a hard money lender (and investor in commercial real estate).  My commercial contracts are drafted by attorneys (or myself).  For residential, depending on what state you are in, there could be a board form available (check with your realtor).  Here in Texas there is a pretty solid form contract available to buyers and sellers of residential properties.