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

[Reggie Maggard]

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]

@Reggie Maggard

On 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.