cashing out investers early

[Dustin Hope]

I need help with my operating agreements, I'm looking at the future and lets say hypothetically my investor wants to cash out early and needs his money soon, what do I do in this situation?

Another situation is when I go to sell and it does not sell at the targeted year that I want. The investor wants his money, how would I get around this? Bring on anther investor to buy him out....

Any suggestions, thanks.

[David Beard]

Here are some things you can do to mitigate the liquidity risk from these loan maturities:

1. Cultivate and maintain a stable of private lenders and lender prospects so that you can bring one in to replace the lender that wants their funds.
2. Along the same lines, use a number of lenders so that your exposure to any one lender is limited.
3. Continually focus on building and improving your bankability. Maintain relationships with local bankers, keep close tabs on your debt ratios, cash reserves, and credit score. Chances are good that after several years of successful rental property management, that you will be able to obtain institutional financing, which is always your cheapest source. But build those banking relationships!
4. Keep tabs on the market value and 30-day quick sale value of your properties, so that you have an idea of the impact of a forced sale.
5. Build your line of credit (LOC) capacity. You can go to regional and local banks and ask about unsecured lines of credit.
6. Look into business lines of credit.
7. Stagger the maturities of your private loans.
8. Keep some HELOC capacity on your personal residence available.
9. Make sure your investor understands how well their investment is performing, and encourage them to look to other cheaper avenues to raise the funds that they need.
10. Encourage your investor to only invest a portion of their portfolio for illiquid asset like private loans, notes, and real estate equity, keeping a healthy percentage in marketable securities or other liquid assets.
11. Try to focus on borrowing qualified funds (IRAs and 401Ks), since it's more likely that the investor will look at these funds as long term and not be looking to tap these accounts for large liquidity needs that arise.

I'm sure there are more, but these come to mind. Great question, btw.