How to make an offering to the right lenders

[Robert Mitchener]

I am new to real property investing. My experience has been with platforms like Fundrise that does the work for you with their own portfolio. I make 16k a year with a roommate that makes 9k a year, for a total annual income of 25k a year. We have saved up approximately 5.5k in liquid investments with another 5.5k in non-liquid investments. Given that we can field only such a low amount to purchase properties that we want to buy and hold to produce a stream of income, we are having trouble finding (as one lending company called it) the "unicorn" of funders, someone who would be willing to finance up to 100% in some deal created for this purpose.

The properties I am looking at range from 65k to 109k, so we've been looking for anywhere between 70k for 1 property to 440k for 5 properties. The company we would be purchasing from has provided the estimated rent collected annually and the NOI after management fees (10% of total rent, which can be replaced by another cheaper alternative if needed) and required expenses. The NOI alone covers the cost of the purchases in 10 years or better. An expense buffer of approximately 5k per property was added to the value of what we're looking to obtain in funding for emergencies and other expenses that occur, up to a cap that when reached, excess would be used to help repay the funding.

Traditional bank mortgages can require up to 25% down payment from the borrower. As we cannot field this kind of money, we'd be waiting at least as long as it would take for the NOI to pay back the principle investment just to get the money to make the purchases (thus waiting double that amount of time before being able to make any return, after the down payment and purchase using a mortgage and that repayment). Other lenders have said similar things regarding down payment, and people or companies willing to finance 100% of ventures are looking more for fix and flips or wholesalers for quicker returns and a solid exit strategy.

As we are doing this a non-traditional way, and would simply like to get the properties into our portfolio, and are not concerned with short- to medium-term returns for ourselves, we've come up with the solution of offering a 35%+ ROI using the NOI of the properties over time to repay the financer(s). That would mean something like, if we get 440k for 5 properties, we would pay back 600k over 15 years, at 40k a year (some of the NOI would be held alongside the initial buffer for emergencies until a certain threshold is reached, after which excess of that could be returned toward repayment).

While this is an excessively long term investment in terms of real estate not going into a funder's direct portfolio, am I missing something crucial in my calculations or expectations of realized returns that would prevent me from finding someone willing to make this type of deal? Could it be more appealing to a funder to offer a larger pool in the longer term, or would it be more fitting to use some of our own income to supplement the return to reduce the time frame for repayment even if the end result doesn't change?

I have researched wholesaling and fix and flips and do not believe I would do well in those parts of real estate, regardless of how much experience I would get from such ventures. Buy and holds are my keen interest, even if I'm not seeing returns for myself for however many years. I am not making an offer here, just giving general guidelines to the types of deals I am looking to make, and gathering information based on responses to improve the potential to be matched with investors who would benefit and be open to these types of deals.