Acceptable ROI for Investors

[Stone Timber]

Hi All

Relatively new to BiggerPockets but been in and out of real estate for quite some time and still looking for answers on how best to do things right - this time.

I am Chicago-based and over the past year I picked up five rehab properties for cash (four multi-units and one single family house).  All are in need of serious repairs, and even though I paid cash for them; holding costs and inactivity over the period is beginning to give me a bit of concern.  I have basically used my income and savings to fund these deals plus the holding costs, and even though I can take my time and have the rehab/s completed at a leisurely pace or so, that is the slow-slow approach and isn't quite the plan I had in mind from the beginning.  I want to do at least 30 of these by the end of the year and I know it is VERY possible.

There are plenty of examples on BiggerPockets about how rehabs have been completed using partnerships with other people/investors/friends/family members etc., and I am thinking of reaching out to some friends to invest with me but my concern (or question) is: how much does one offer these type of investors?  5%, 10%, 20%??  The simple answer is probably something like 'it depends on what you agree with the investors', but I know there is probably a thousand other different answers or solutions from people who have done this over and over again.

Any advice or suggestions will be very much appreciated.

StoneTimber

[George Krajacic]

Analyzing your figures shows that you already minimized the risk for investor by spending additional $20,000 on repairs. Consequently you only need to borrow about $30,000. It is excellent LTV which minimizes the risk for a lender. Also I would borrow more money than what you think you need just to cover any contingencies and not lose any time by potentially running out of funds. It is much easier to borrow more money up front than to go to a lender second time for more money.

Now the question of what return you should offer to a lender, you already got a good suggestion “ask a lenders”. I would suggest being fair and offering market rates or little more so you can attract needed investors. Plus or minus two percent will not significantly affect your bottom line.

Looks like you have excelent project.

Good luck,

George