Have Investor - Need Structure

General Real Estate Investing
1

OK, so I have found an undervalued property I would like to purchase. I would like to then turn around and do a lease purchase for about a 20% spread.

I have an investor who is interested - The question is what is the best way to structure his involvement in the deal. Perhaps x amount of dollars secured by a second lien on the property, payable at x% intrest, perhaps on a five year balooon. What is a fair return for an investment risk such as this?

Thanks for your feedback…

2

All this stuff is flexible and negotiable. He may want to be a partner or just a rate of return on the money invested like a mortgage. It is always best to ask what they want out of the deal instead of offering. It also depends on the risk involved for the money man. What happens if it goes bad. Can he walk away and only loose his investment or will he be on the hook for payments on a mortgage etc. Really need to know all the details before trying to come up with a return for the investor.

You can get hard money from lenders at 14 to 15 % interest with 4 to 5 points so keep that in mind if your guy wants too much. Hope i gave you a few ideas to chew on

Thank you,

Ted P. Stokely Jr
11505 Sw Oaks
Austin, Texas 78737

512-301-9171 home
512-587-6177 mobile

3

Yeah, ya did? I woud really like to keep him in the backseat - Just an investor looking at a rate of return, his investment secured by a property. What is the best financial structure for this type of arrangement?

4

I did a deal with a guy like that and here is what we did. He agreed to loan $25,000 on the house and fund $12,500 upon my buying the property. I paid $10,000 down and the seller carried a 2nd for $8000. My investor then funded the remainder with draws against work completed. I gave him a note and deed of trust at 12 % interest. He was just an individual and was looking for a good rate of return and low risk also. After repairs the house was worth $45,000 to $50,000.

This was 5 years ago when rates were a bit higher. Perhaps 10 % or even 8 % would be super for you and still a good return for the investor.

I am assuming that your guy will fund all or most of the project.

I had not read your web site when I first answered your post. Hope I was not preaching to the quior.

Good luck and happy investing

Ted Jr