All Forum Posts by: Jeff Rabinowitz

I've found that the best way to learn what an investor wants is to ask them. Do they want to be a deal partner, an equity partner, assuming a higher risk for a potentially higher reward or would they prefer a stated interest rate? How long are they comfortable lending their money, what return would they like, do they want monthly payments or would they prefer a balloon at the end? Once you learn what they want structure a fair deal and protect them with a recorded first mortgage. If they will be in the deal for an extended period make sure you buy them a lender's title policy. Name them as additional insureds on the liability policy. Communicate with them frequently. Oh and when your deal is successful give them a little bit more than they asked for. The best way to fund your next deal is to keep your current lender happy.

I have done this occasionally. It is only really a benefit to me if I believe the applicant would be a strong tenant--meaning I think they will pay their rent on time consistently. I usually figure in a planned rent increase and divide that over the term. Essentially, the tenant is paying a slightly increased rent for the security of having a 2 year lease. The last time I did this was for a single mother that wanted to ensure that her child would not have to move from a school that they really liked.

Most often I get offers like this from tenants that I believe are marginal, at best. Somehow they think that giving me a longer commitment and, perhaps, a more difficult time terminating their tenancy makes them more appealing as a tenant. It does not. I get particularly nervous when a marginal tenant offers multiple months of rent up front as an inducement to rent to them. I have fallen for this a couple times and it was an error both times.