Hard Money for Auction Purchases

[Travis Nebeker]

I am looking to purchase rental properties at foreclosure auctions. I have no problem obtaining conventional financing, but cannot close fast enough to utilize that as a funding source. I have done a conventional live in flip on a higher end property, but have not purchased using hard money before. My intention would likely be to BRRRR the property/properties purchased at auction. I have a conventional lender lined up for the Re-finance and a 10% downpayment.

I am curious if any members have experience using "Hard Money" to fund auction purchases or if it is even possible. The auction type is in person and the funds are required at the  close of the auction in cash or cashier's check. 

[Jake C.]

The way I built my business was by splitting the profit with investors, while offering them a "preferred return" of 8%-10%. Preferred return can mean different things to different people, for me it was similar to what they call a "waterfall".

So:

Investor makes the first 10%

I make the next 10%

We split the remainder.

If the deal only returned 15%, investor gets 10%, I get 5%. If deal only returns 10%, investor gets it all, I get nothing. 

On juicy enough deals, this does a lot to comfort the investor as his risk is very low (assuming the deal is underwritten properly), as you only make money if he makes money. A lot can go wrong before his 10% gets eaten into.