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Updated about 1 year ago,
Investor / Finder Models
I'm working on some different models to present to an investor. I know there's a million different ways you can package a deal with an investor(s) but I'm looking for some basic models that people have used and found to be effective. What are ya'll using?
Example 1 - here's one an investor friend used for STR/LTR; longterm holds:
- Investor purchases property with cash / leverage
- After cash sale and capital improvements (finish basement, add a mother-in-law-suite in the basement, etc.), refinance the property based on purchase price + capital improvements, both partners put in 10% to 12.5% cash* of this amount (minimum down payment for investment properties)
- At this stage, the property becomes a medium to long term hold and monthly rent pays the new mortgage
- Property management:
- ~20% of gross monthly income for STR / MTR
- ~7-10% of monthly rent for LTR,
- 50/50 split on improvements to property (i.e. new garage or finish the basement, add a bedroom)
- 50/50 split equity partners, 50/50 split on appreciation
*Possible cash clause: if I cannot bring the upfront capital to the table, then I can buy back in over time, but can’t get more than 50%. Cash flow in that case goes towards managing partner equity stake
Example 2: here's one a mentor of mine told me could work/he has used before with fix and flips:
- Investor purchases property with cash / leverage
- Investor funds property renovations
- Investor recoups investment amount (ex: $500k) + ___% (ex: 7% of $500k = $535k)
- Remaining profits are split _____ between investor and finder
- Project management fee: _____/month paid to finder during property renovations to oversee contractors, hire contractors, get quotes, purchase supplies, obtain permits, etc.
Example 3: And here's yet another a different investor friend told me about for STR investments:
- Investor purchases property with cash / leverage
- ~2% (of home value) finders fee
- __% equity stake/ownership to finder
- __% management fee to management company
I know this is a can of worms, but hoping to engage in a productive, kind discussion.