Opening a fund/OPM

[Matthew Modabber]

Hi guys, 

Just got into RealEstate and found this page, first post, and love this community. 

I bought one section 8 rental and I'm very happy with the returns. I have some best Italian friends who I recently spoke to about my success with this rental and we discussed the comparative much lower CoC returns in Italy.

They want to invest with me on the next properties and we were thinking of doing a 60forme/40forthem split on the net cashflow from each property but the property would be theirs since they would put the downpayment. 

I heard people do 50/50 all the way. 50/50 net cash flow and ownership. 

A couple questions:

1. What structure is best for OPM, of the two strategies mentioned above what would benefit me best? These section 8 properties I'm purchasing don't appreciate all that much in value so the extra 10% cashflow seems more valuable. 

2. Is OPM as easy as they send money to a business bank account and with each friend I open a separate LLC from which I buy their properties from them?

Assuming obviously everything is very well tracked and at the end of every month I send the respective real estate rent from the business bank account? 

3. Any general advice, guidance, and hacks such as softwares you'd recommend etc?

Any feedback is tremendously appreciated :)

[Steve Kenney]

Hey Matthew,

If your friends have money and want to invest with you, one option would be to use a promissory note, where they lend you money for the down payment but the property remains in your name. You can offer them an 11% return and pay them interest only payments for 24-30 months. You can then refinance the property and pay them back. This is a great way to go because they are getting a good return on the money they lend you and you are able to scale without coming up with a large down payment. If you do a deal using this method and it's successful, then maybe you could consider doing a joint venture with them on another deal.

Good luck!