Using other peoples money…

[Joe Young]

since selling my primary and using profits to invest… we’ve acquired (since sold) a few rentals, done a dozen flips, and bought commercial properties all in the last year.  I have used hard money loans mixed with my own funds.  

After gaining experience, I want to use other peoples money for all my deals.  MAINLY down payments… I don’t mind using my cash short term, but how do I structure private money for down payments?  I have used a lender that was ok with 2nd position, but those are few and far between… but also - the banks don’t like that I’m borrowing money from them, and also borrowing the money for the down payment.. 

again, I have the funds, about $1 mil cash… but I want to leave that available for quick home run purchases, and operating funds.  I understand I need to have skin in the game, but very hard to scale when you have cash sitting in long term holds. 

[Tom Weglarz]

Hey Joe, great question!

Every business owner who reaches this point begins to realize...

"I'm not in the car business, the mattress business or the candy business... I'm in the business of scaling!"

If you're not using hard money loans (and I'm sure you know the difference after using a mix of your own funds, and hard money loans), you'll want to use a mix of Seller Financing and Limited Partnership.

Seller Financing means that you can get a seller to leave money in the deal immediately, since they hold the value of the property. Check out Pace Morby's interview with Bigger Pockets, and Pace Morby's youtube videos.

Limited Partnership (Investopedia Definition), means that you get control of a silent investor's cash, and that silent investor gets control of your time and income. How do you find this silent investor?

This is where you work on your networking game. If you're serious about investing, I recommend going to a top 100 city in the US (population wise) and approach your city's Chamber of Commerce, Investor Groups and Clubs, and social networking clubs like the Four Seasons.

If you can dress and speak the part of a well-educated person, investors will see that fire in you! This can be the hardest part of attracting the right relationship, especially for introverts, but the best way to form investing relationships is to... form relationships!

If you'd like me to elaborate, just say the word!

Good luck!

Tom Weglarz