Raising Debt for Long Term Rentals

[Marc Izquierdo]

Hi everyone,

I’m interested in raising debt for small multifamily deals but I have a few questions about it and how I want it to work with my proposed strategy.

One of the things I'm wondering about is how to structure a deal with multiple debt investors and what security they can be offered. For example, I find a duplex for 200k that needs 20k of work to get rented and operating. Since I only have one deal under my belt, I'm assuming that potential investors won't be comfortable with lending me 100% of the project cost. So my strategy would be to get a 70%LTV loan and mortgage from a bank and find maybe 1-3 debt investors to finance the rest. So at the end of the day I would have one loan from a bank (1st mortgage), a second loan from an investor, and maybe a third from another investor.

My questions are:  Is this a feasible strategy?  What type of security can I offer the investors?  Can I give them 2nd and 3rd mortgages?  How would a bank feel about that?  If I can’t give them mortgages, then I guess I can only give a note and personal guarantee?  

If anyone can offer some info on how to best structure something like this I would really appreciate it.

As additional info, I plan on buying in an LLC with a commercial loan.

Thanks in advance!

[Marc Izquierdo]

@Theo Hicks

Thanks for the input.  Long term means for myself, not necessarily for the investors (unless we negotiate such).  Ideally I’m seeking short term debt with the plan of refi’ing them out after 6 months to a year.