How Do You Pay Your Investors?

Question

Hey BiggerPockets world. I am so grateful for this site as I have learned so much and I continue to learn. I listen to the podcasts and listening to podcast 227 got me wondering, how are you all paying your investors or hard money lenders? I would like to get into apartment investing and alot of people use other investors to do this so I am curious... what is your payment schedule for the investors you work with? Is it after the deal closes, monthly, a year, once the property sells, etc.? Also what are the typical interest rates/returns you provide? Please share

Tamiel Kenney · Answer

@Jaquetta Turner   Frequency for distributions depend.  Quarterly seems to be the most common, but we have also started paying monthly on some of our properties.  In some cases, the lender will dictate the frequency of distributions.  For example, HUD only allows distributions twice a year.

Jeff Greenberg · Answer

We typically distribute funds quarterly and after the sale of the property.

Michael Le · Answer

Some sponsors pay monthly but most pay quarterly. Usually it will start the first or second quarter  after the closing.

Chinmay J. · Answer

@Jaquetta Turner - Depends...

Hard Money Lenders (HML)  get paid on points at the closing (you buying the property), and regular monthly interest payments. As the name suggests, they are lenders. They don't have equity position in your property - unless they end up foreclosing on it - at which point they own the property.  Typical rats for HML range between 10-12% with 3-5 points with 20-25% down. HML will lend up to 65-70% of the ARV (typically) - More experience you have; more favorable rates you will get.

If its a Equity Partner, then the answer is whatever you decide between the two of you.

Jaquetta T Ragland · Answer

Ok quarterly makes sense. Thanks everyone for the input. Keep them coming!

Jaquetta T Ragland · Answer

thanks @Chinmay J.

How Do You Pay Your Investors?

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