Ok so what are the going rates and terms for investing privately?

Question

Im trying to find out what competitive terms look like, specifically the KC market but I would like as much input as I can get.

Don Konipol · Answer

@Reggie MaggardOn the equity side sophisticated or accredited passive investors look for an overall 15% return’ usually composed of a 6-8% annual cash flow from operation, and an annualized 7-9% capital gain in 3-5 years through either sale of the property or a refinance enable by note amortization if leveraged and increase in value due to operator effort or discounted purchase price.On the debt side sophisticated and accredited investors look for 8-9% for VERY SAFE loans where the collateral is A or B commercial property in a major metropolitan area and the syndicator is large and increased, and the LTV is 60% or less. For deals that do not match the above, the yield moves into the double digit arena. For halfway decent property with an experienced syndicator at 65% LTV or better the investors want 11-12%. As you move to more perceived risk (the investors perceived risk, not yours) the return necessary to attract interest increases.Some operators have been able to attract investor interest offering a lesser return by targeting non accredited, non sophisticated investors, whose choices are more limited. From a syndicators point of view this is not only a more difficult way to raise a significant amount of capital, but it is much more restrictive in how it can be accomplished if done in compliance with Reg D. If done using the general exemption for private offerings, then the syndicator loses his statutory defenses in any lawsuit brought by a disgruntled investor, making it much easier for an investor to win at trail, and making the syndicator a magnet for attorneys willing to take the case on contingency, in contract to syndications which are done correctly under Reg D where attorneys would only take the case being paid not contingent on the outcome, unless fraud is involved.

Shiloh Lundahl · Answer

@Reggie Maggard we offer 8% for 1 year, 9% for 2 years, and 10% for 3 years for private money loans. Then we have our title company agent put a deed of trust on one of our properties in the name of the private money lender in second position to the underlying loan on that property (we only put 1 private money loan on a property).We usually get loans between 10k and 40k but sometimes more and we will leverage a property up to 75 to 80%. Part of our system is that we also show the private money lender our system for investing. So it’s basically paying for education but then, instead of having your money gone forever, you get your money back plus interest while you’re learning how to invest and you get access to successful investors to help you learn how to start your own deals using the lease option strategy.

Joe Villeneuve · Answer

Why did you arrive at the terms you mentioned here?I'll tell you what I would pay...all day:1 - 10-12% simple interest...IO payments, monthly2 - 15-30 year term with balloon.3 - requirements: a - Uncollateralized (don't worry, this would be much less risky for the lender than if it was collateralized...as close to risk free as it gets) b - Minimum of $300k ($500k) loanExample #1:Loan: $300kTerm: 15 yearsInterest: 10%Interest/Year: $30k (12 payments)Total Interest: $450kTotal Payback: $750k Example #2:Loan: $500kTerm: 30 yearsInterest: 12%Interest/Year: $60k (12 payments)Total Interest: $1.8MTotal Payback: $2.3M...and I'm NOT nuts.

Lee Ripma · Answer

@Reggie MaggardDo you mean if you were to be a private lender?

Joe Villeneuve · Answer

Whatever the lender says they are. There are so many options here, that trying to narrow the terms down like you want is like asking how much it costs to buy a car.

Joe Villeneuve · Answer

????????

Reggie Maggard · Answer

@Joe Villeneuve wow...I’m amazed that people would go that far out not having their money

Joe Villeneuve · Answer

Why? This isn't the stock market where you are investing for virtual money. THis is REI where the most important return is what comes "out" of the investment

Storm S. · Answer

@Joe Villeneuve what’s the irr of those cash flows i would calculate it but I’m camping right now.

Reggie Maggard · Answer

Im looking to create a limited partnership and I wanna know what kinda term to offer. What is 'competitive'? How long until I have to buy them out? What rate? Do I have to offer any extra pieces of the pie above those terms? I would like to offer 8% interest only paid quarterly for 5 years and nothing else. Im starting to get the impression that may not be enough.