I have a deal that I'm facilitating that's off market. The deal requires around $60,000 cash as down payment on mortgage. I'm planning on providing $15,000 cash along with taking on the mortgage and managing the property. I'm curious to know how to structure this deal with an investor. Assuming we agreed upon 50/50 split on cash flow and an investor exit at refinance with me taking on 100% ownership, what kind of agreement is required to facilitate those distributions and exit? Would this be a separate contract or would we be better off putting the property into an LLC with 50/50 ownership with a operating agreement that explains distributions and exit for the investor. This is my first deal. Any help is greatly appreciated. Thank you.
Are you actually getting a mortgage? Or, is it a private loan?
Honestly, it looks like your investor is not going to be involved with the deal. It sounds like you need another $45k for the money down and mortgage. So, the investor is just another lender. Work it out on that basis.
Are you actually getting a mortgage? Or, is it a private loan?
Honestly, it looks like your investor is not going to be involved with the deal. It sounds like you need another $45k for the money down and mortgage. So, the investor is just another lender. Work it out on that basis.
Good luck.
Thanks for the response. Yes I would assume the mortgage and use an additional loan from a friend towards the down payment. Is this common practice? I would then pay him a specified return each month as well as a percentage of the cash our refi. The mortgage includes rehab and the estimated ARV would provide that initial investment plus a lot more. Then once the investor is paid back I would own the property with a nice cashflow and 25% equity plus cash for another investment. Refi estimated to produce $100,000.
Okay.. that still doesn't make much sense. well i'm still confused.
are you actually assuming the existing mortgage? You could talking about the money down (its not really a payment), but there really isn't any if you are assuming the mortgage.
Then, you say that the mortgage includes rehab... So, you aren't assuming the mortgage? and you are doing some sort of reno or 203k loan?
Again, I would take Title alone and leave your investor as just a "lender." I don't know what "... percentage of the cash our refi" is either...
@Konnor Lange You can structure this deal one of two ways. You can do it as a joint venture where you partner will also likely sign and guarantee on the debt, or you can have an investor provide you debt. The deal is so small you are going to have lenders motivated to lend commercially and be alright with you taking on additional debt so you're basically looking for an equity partner willing to take on this arrangement. Once you settle on terms, send those to a lawyer to draw up. I would look up a sample operating agreement to review how you want to structure. Always have an operating agreement because when disagreements happen without one I find it's not because people are lying or not acting in good faith but quite frankly you will have many conversations and its highly like your version of events will differ because one partner may remember a conversation had at one point while you may remember a conversation at a different point in time. If it's written and you both agree to it will eliminate any hard feelings later if there is a disagreement.