How to Buy and Hold with Other People's Money

General Real Estate Investing
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How to Buy and Hold with Other People's Money

Pete Woelfel
Milwaukee, WI · Member since 2017 · 138 posts · 69 votes

Hi All, 

This is my first post on this forum, if this question belongs elsewhere please let me know.

I'm in the early stages of building a portfolio and would like to start leveraging my experience and bringing my knowledge and hustle to the table while someone else brings the cash, and I have some interested investors.  I'm really struggling with how to structure the deal and would love some thoughts from all of you smart people out there.  

Have any of you done a partnership where you've done all the work and someone else has brought all the cash for a somewhat turnkey buy and hold?   I know I can meet the investors return goals with plenty left over for me while still funding a reserve and , and I know the investor does not want the mortgage in their name which is fine with me because I'm in it for 5-10 years or more.  I'm wondering what people have had success with as far as the length of the agreement (How long does the investor need to keep their money in?) , how contracts have been structured to handle repairs, vacancy, appreciation/depreciation, etc.

Thanks in advance for any thoughts!

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  • Erik Anderson
    Rental Property Investor · Hilton Head Island, SC · Member since 2018 · 24 posts · 13 votes
    7y
    @Pete Woelfel There are a lot of different ways to do deals like that. First off you need to do the math yourself and have a solid understanding of what your investor is looking for in time and volume ie.(%) I look at an offer price first, then my interest payment, then the: insurance, termite bond, managing costs, property taxes. All added up you see where your rent HAS to be. If that is not realistic something has to change. You want to be mutually beneficial but the numbers have to be right.
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  • Pete Woelfel
    OP
    Milwaukee, WI · Member since 2017 · 138 posts · 69 votes
    7y

    Thanks @Erik Anderson

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  • Jim Pellerin
    Real Estate Consultant · USA · Member since 2014 · 1k+ posts · 751 votes
    7y

    If the investment is a loan, you can offer them a monthly payment based on an agreed to interest rate. This may not be feasible based on your cash flow. Or you can offer them a balloon payment due after you refinance in 3 to 5 years. In either case, you can offer them a mortgage or a promissory note to secure the transaction.

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  • Pete Woelfel
    OP
    Milwaukee, WI · Member since 2017 · 138 posts · 69 votes
    7y

    Thanks @Jim Pellerin!  That's along the lines of what I was thinking of.  My concern would be that after even 5 years, without the guarantee of some significant appreciation, I don't think the mortgage payments will have built up enough equity for me to be able to guarantee the entire principal back without actually selling the property.  I guess that's where I need to save the extra cash flow I'm estimating for myself and make sure the numbers work to where if I save that and combine it with the equity that's paid down I could contribute enough to buy the partner out of their original investment?

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