Lets say I buy a property, put 20% down of my own money, and it cash flows strong. I then want to free up my money. I find an investor to give me the 20% in Exchange for a competative interest rate, due in 5 years. Investor makes good interest on his cash, I still have positive cash flow and pulled my money off the table, which was my objective by offering this to the investor.
I guess this would be a promissory note since security for the investor’s money would be a second position on the property. I know hard money lenders typically like to be in a first position, but I know they lend money for aquisitions. What I’m looking for is an investor to invest into an existing income stream, much the same way he would invest into an REIT.
That’s exactly what I intend to do to button up the purchase, is to use a HELOC. The propblem is, my funding is limited. I can only do so many number of deals until I run out of funds. So what I’m researching, is if its possible to buy a property, establish a record of cash flow, and then solicit other investors to pay into the cash flow for an attractive return, for a few years until I can refinance w/cash out to a re-pay the investor.
I just wanted to know technically what this type of transaction is called and if it is common or has been used by anybody to free up their cash (or borrowed HELOC money) in a deal.