Private Money For Conventional Down-Payments

[Oliver Trojahn]

We currently own 4 rental properties (SFR's). We buy them at 50-75k and they rent between $1,000 and $1,200. A type neighborhoods with great schools. I want to increase our portfolio to 16 total houses which would max us out on our 10 loan max rule, I want this done in three years. We now have to put 25% down and have been getting some private interest (friends/family) to invest with us. We will be using their money for all down-payments.

The rate for the down-payment funding is 10% annually. We only pay the interest earned each year in January and will return the principle when we decide to pay it off the loan. No minimum loan term or length

Do these seem like good terms for us to finance down-payments and continue to buy properties?

I have some concerns of being leveraged. But I think i need to continue to scoop up SFR's in this market and max out my conventional lending ASAP.

All thoughts are greatly appreciated. I would consider other options as well to get to 16 properties. We plan to buy a house once every three months or so alternating who's name it is under.

[Chris Martin]

Sounds like you are operating a multi-manager LLC? If so, theoretically each member can acquire personally (per member) and deed into the LLC as a capital contribution. The deed to the LLC should be included as part of the initial financing closing package. I've personally seen this done and believe it is still viable.

As for borrowing down payment, we always stayed a step ahead. If you can encumber prior deals, then the next deal is done with free capital. Lenders (I guess more on the commercial side) like this over encumbering the current transaction.