I currently own 2 rental properties which have proven to be a success. I have a background in real estate and some in construction. I have 2 individuals that want to get into RE investing. They have no experience whatsoever but have VERY deep pockets.
I am willing to manage properties, find tenants, do minor repairs (and contract out what I can’t do at way better rates than the normal person would pay if doing so retail), and pretty much anything else that needs to be dealt with. But, these investors want me to be involved so that I have a stake in the operation versus just milking them for money…
What is a good way to structure regarding % of ownership, etc?
If they are the capital and credit, would it be reasonable for me to get a % of cash flow as well as % of equity over time?
There are several ways to accomplish this. The best way is for them to loan you the money at a reasonable interest rate and pay them the mortgage payment and you keep the cash flow. The second best way is for them to loan you the money and the cash flow is split as all parties can agree. Both of the above have the title in your name. If you are going to flip or rehab then a split of the profits as all parties would agree to would also work. What I have set up on 2 houses is an individual loaned me the money to purchase and rehab a house and I pay 8% interest and all funds are due on sale. I have it sold on rent to own and when they cash me out I cash out my private money lender + int. and we do it over again. You can do the same or offer a 50-50 split when sold. Put every thing in writing and spend the money on a lawyer and title Co. Show the lenders your insurance policy on the property that you have purchased with their money. It will work out for everyone.
Redhawk
Well, they are more interested in holding for 3-7 years and collecting a descent cash flow. Then, dispose of properties that we feel “peaked” and hold on to any properties we see are great cash-flowers or see significant future value.
Also, they are looking to not pay cash, but more or less put enough money down to obtain cheap money (especially these days) and cash flow, and leverage their money to keep acquiring more. (These are finance guys always looking at leverage as much as possible).
These guy are trying to do the same thing you are trying to do. They are not private lenders. Look elsewhere.
Make your offer as I said in my previous post and if they think that they know more than you do about your market,just walk away,they will be back after they do not get the cash flow they are looking for. This happens a lot with newbies because someone told them or they read a book on it and now are experts. Management and rehab is a good deal to bring to the table,your friends will realize that on their second deal.
Be patient and keep looking for real investors.
Redhawk