Building/Investing With A Partner

[Elliot Larkin]

Hi There,

I renovate, build and manage properties in a Florida college town. So far, my business has been limited to my family, as far as investors, and we have been successful doing renovations and more recently building from the ground up as rentals and flips. I have a few friends who are interested in investing capital into the projects and I don't have any experience with this. What is a reasonable return for an outside investor who is simply investing cash? Any recommendations on the structure of the partnership - I am looking for details. (I have been doing construction loans with banks at 5.5% 5 year fixed then adjusting each 5 years thereafter 20-25 year amortization. But even with the banks I have to put down 25% of the project cost, which is where the investor comes in.)

Responses greatly appreciated.

[Greg Dickerson]

Originally posted by @Elliot Larkin:

Hi There,

I renovate, build and manage properties in a Florida college town. So far, my business has been limited to my family, as far as investors, and we have been successful doing renovations and more recently building from the ground up as rentals and flips. I have a few friends who are interested in investing capital into the projects and I don't have any experience with this. What is a reasonable return for an outside investor who is simply investing cash? Any recommendations on the structure of the partnership - I am looking for details. (I have been doing construction loans with banks at 5.5% 5 year fixed then adjusting each 5 years thereafter 20-25 year amortization. But even with the banks I have to put down 25% of the project cost, which is where the investor comes in.)

Responses greatly appreciated.

 First thing is there are rules and laws regarding raising capital. You want to discuss your plans with your real estate and and SEC attorney. If you are taking on passive investors and not giving them a note and deed of trust that would be a security and requires and exemption. If you take on one investor per deal as a lender secured by the property thats a loan and not a security. All that being said 6-10% is standard for private money these days depending on your network of potential investors and what they are looking for.