@Christopher Smith exactly, it's all about being creative, and networking.
Once you start telling everyone you know (think all relatives and friends, and friends of relatives, and relatives of friends, neighbors, relatives of neighbors, etc. I'm sure you get the point), you'll eventually start hearing about how interested (almost) everyone is in real estate investing. Now, it will be hard for the first deal, because you can't point to your proven track record - but depending on the size of your network and the size (and projected returns) of the deal, it's definitely doable.
Now onto the math. First, you'll never get an interest only loan for 30 years. Never say never, right, but really, you'll probably win the lotto first.
Let's use some numbers to illustrate how this could work. You want to buy a $1m property at an 8% Cap, so it produces $80k in NOI.
Assuming a 70% interest only loan at 6%, you'd be borrowing ($1m*.7 = )$700,000 and paying ($700k*.06 = ) $42,000/year in interest payments.
You raise from family and friends the remaining $300,000. You have $38,000 left after debt service ($80k-$42k). The 9% (let's call it) preferred return totals ($300k*.09 = ) $27k. That leaves over $11k.
Now, what happens with this is anybody's guess. Or really, it's to be negotiated up front. You can set up the deal such that after the preferred return is paid, you get the rest. This is not too likely, because it puts you in a bit of a conflict of interest in running the property well and just clearing the preferred so you make money.
Or, you can say to the investors, hey, you get 9% and then we split everything above that.
Or, you get no preferred return and we split everything 90(to investors)/10(to you) so you get 10% of the $38k left after debt service.
Sorry, I got lost. The point is that your total "cost" is $42k+$27k=$69k. So you're really only paying 6.9% of the total capitalization (assuming it's flat at the $1m), which is substantially less than borrowing the whole thing at 9% (and not the 15% either. You need to wait the returns and not just add them up - this is because the 6% interest is only on the 70% portion and the 9% is only on the 30% portion - but they're not both (15%) on both portions).
Does any of that make sense? If not, seriously, feel free to ask.
As far as your exit strategy is concerned, yes, it makes total sense. Everyone's goals are to sell for more than they paid and/or earn income. It's a bit more complicated than that, though. You need to be able to provide a reason why you'll be able to sell for more than you paid. And you also need to try to figure out how much income you might earn from the property. See the example above - there might be something there for you, but on one deal, especially your first, it's unlikely going to be a homerun that sets you up with capital for years to come.
Keep learning, reading, listening. And meet local investors.
Good luck! When you post your first success story, please remember to tag me - I want to celebrate with you!
