Please help me analyze and structure this deal!

I am analyzing a deal that needs significant rehabbing. I have a potential private lender that may be willing to help me acquire the property. I’ve mentioned to him in the past that I am interested in real estate investing and he may be willing to help me. I am not sure (due to lack of experience) how to propose a fair offer and want to make sure this is a good opportunity.

The building in consideration is a 6 family each 2-bedrooms renting at $750 each (currently 4 are rented, 2 vacant). I know the area fairly well, it’s a good neighborhood and this building is clearly the sore thumb which I’m sure the neighbors dislike. I think that once renovated, the rents could go up to $900 a month (the average in the area for a 2 bedroom goes for $850-$1000).

I believe it needs $125K in repair and maintenance to bring up-to-date. I will have a GC visit property with me next time I go visit it but I would like to make the property solid for 5-10 years. It appears to need new roof, windows, furnaces, deleaded, landscaping, and better parking design. I think I would need to obtain the property for $175-200K to make the numbers work.

How would you structure this deal? Let’s assume I am able to obtain the property for $200K + plus renovate it for $100K. I would be into it for $300K.

Would you ask the private lender to finance the entire $300K and then refinance with a bank to get out of it once the rehab is done and share some of the new equity during the refinance?

The long term goal of this property would be to buy and hold. Or perhaps since the units are townhouses perhaps consider turning them into condos (though I have not done any due-diligence with the Town to determine if this is possible yet)

what are you going to use the private money lender for, short term financing, or are they more of a partner providing the financing for the deal long term.

if they are taking care of all financing aspects, short term and long term, then they are probable due half of the cash flow, unrealized capital gain and appreciation

if you only need them financing for short term and can secure your own financing after rehab then you could probable pay them a fee (points) and high interest rate for the duration of the loan

thank you for the advice. my initial goal would be to get their help for short term financing and pay a fee after rehab and finance.

What do you think is a fair/standard points to offer for 1,2, or 3 years? Also would they get paid at the back end of the deal?

thank you again!