How to structure a specific deal to raise capital?

[Eric Michiels]

Hi, I have an opportunity in GA to buy single-family homes and work with a company that puts tenants in each room. They pay weekly for the room but rent for at least 30 days. Vacancy is very low because there is a lot of demand for this type of arrangement. 

I want to raise $7M at 11% to buy 20 houses. Fix them up to have each one set up with 6 to 7 rooms. With that rent money I'm able to cover a property manager, repairs and interest. But I want to structure the deal so that when we sell the properties I get a cut from whatever we make on the houses. 

Any advice on how I can structure a deal like this? I don't want to reach out to investors and sound ignorant on terms. 

Thank you,

Eric

[Alex Breshears]

Hi Eric! Love the enthusiasm, and there are some great points written here, but I will tell you that officially raising capital with an SEC exemption is no small task. What may be a better option since you are new to the business model would be to start cultivating private lenders for each property, rather than going full bore into 20 properties that haven't been identified yet.  That way you can match up one individual lender to one property, the lender gets title insurance and is named as a mortgagee on the hazard insurance, and you sign a promissory note and whatever the lien instrument is in your state (mortgage vs deed of trust).  Some people may have capital sitting on the sidelines that they want just regular income coming in monthly, so they would be happy to have a private loan out for longer periods of time because they want the steady income.  That way you could get a few properties under your belt with this business model, knock off all the dust, build the processes and infrastructure to run it well, and then go to the market to raise capital with experience from the first few properties.