Developer · Houston, TX · Member since 2015 · 1k+ posts · 1k+ votes
9y
It would be hard for you to find someone to come in as a debt partner for the down payment because that means you're expecting them to be in the second position, subordinate to the bank. Unless you were buying a property way,way under value it's too risky a spot to be in.
Why not just bring them in as an equity partner? Give yourself a percentage of the deal for finding it, putting it together, managing it, etc.
Residential Real Estate Broker · Delray Beach, FL · Member since 2015 · 43 posts · 14 votes
9y
Thank you @Account Closed, can you elaborate a little more, if possible? 40/60 of net income after debt service? And then 40/60 split of gains at exit?
Developer · Houston, TX · Member since 2015 · 1k+ posts · 1k+ votes
9y
@Carlos Casanueva, it'll depend on the deal and will have to be a negotiation between the two of you. Let's say your partner puts up 100% of the down payment. How much of a percentage of the deal is fair? I think it depends on how good a deal. If you found just an absolute home run deal and the partner can get 50% COC yearly with just 20% equity, I'm sure they would be okay with that 80/20 equity split. I mean, where else would they get that return? But if 20% equity means they get 5% then why would they do it? Maybe at 60% ownership that returns them 15% then they'd be interested. But then again they might be happy with just a 10% return so you wouldn't have to give up that much. So that would go back to the negotiation between the two of you.
Will you be able to put any "skin in the game "? Or are you looking for 100% financing for acquisition, rehab, closing and holding costs?
Private Lender Financing can be structured many ways. It depends on how much risk they are willing to take. And how much of the costs you want covered by the lender.
Are you looking to purchase a multi family property will private lender and refinancing later with a conventional loan?
Developer · Houston, TX · Member since 2015 · 1k+ posts · 1k+ votes
9y
I assume your $725k price includes the basic renovations you need to get that upside? Since you said it is in good conditions I'll use $2k a unit, so purchase is $705k. I don't know anything about the building or area this is in but let's just use a basic 8% cap rate. Based on that the NOI is $56.4k. To get it to $900-950k you would need to bump the NOI up to $72-76k. That's $1560-1960 a door. That's $156-196 rent increase each month. Is that reasonable within 18 months? It doesn't seem so to me even if it's below market. You would have to wait for the leases to expire before you did anything and anything that drastic your vacancy would shoot up.
Residential Real Estate Broker · Delray Beach, FL · Member since 2015 · 43 posts · 14 votes
9y
@Michael Le that's correct, they are below market rent by that much. I did factor in my improvements in the purchase price. 6 of the 10 units are on month-to-month (no written lease)... and I can renovate each unit in 30 days. I think 18-24 months is very reasonable to stabilize thos property. Don't you?