Short Term Funding For Investment Project

[Ryan I.]

Hi All,

I am looking for some advice regarding best ways to acquire short term (approximately 24 months) capital for real estate development projects I have an opportunity to be a part of. 

Long story short, I am a structural engineer who inspects/consults on existing residential and commercial structures. Since starting at the company, the partners my firm have started development and construction companies (one services the other) which buy and develops/builds/renovates/remodels single family and small multi family residential properties. The partners have allowed myself and a couple other partners to invest as a perk for our loyalty and value to the engineering firm. They did not need our capital, so I appreciated the opportunity to essentially be a silent partner in the investments. The first two investments have gone very well as I have been able to essentially double my modest investment on both projects in just a 7-12 month window. The other projects the partners have completed have all gone very well. They are experienced and adept at identifying quality investment/development opportunities.

Now that the development projects are ramping up, the partners of my firm have decided to formalize the investment fund for select employees into essentially an evergreen type fund. Given the success of the initial projects, I am looking for ways to increase my investment size for the next investment period. I have looked into various types of loans, but haven't quite been able figure out what the best options are for my scenario. I have no personal debt outside of my mortgage on my primary residence (starter home), in which I have roughly 200K in equity. 

The formalized fund requires a 24 month "lock up" period of any funds invested, so I am looking for a way to acquire some capital for roughly that time frame to increase my investment size and grow my capital more quickly. I would plan to recoup the amount of that initial investment (plus any applicable interest) following the 24 month period to repay any amount borrowed, while reinvesting the profits within the fund. 

I am looking for any advice in this matter regarding types of funding which I may not have considered, or advice on what type of loan/borrowing would work best in this scenario. If my plan sounds like a silly idea, feel free let me know why! 

Thanks 

RI

[Brandon Beardt]

Quote from @Ryan I.:

Hi All,

I am looking for some advice regarding best ways to acquire short term (approximately 24 months) capital for real estate development projects I have an opportunity to be a part of. 

Long story short, I am a structural engineer who inspects/consults on existing residential and commercial structures. Since starting at the company, the partners my firm have started development and construction companies (one services the other) which buy and develops/builds/renovates/remodels single family and small multi family residential properties. The partners have allowed myself and a couple other partners to invest as a perk for our loyalty and value to the engineering firm. They did not need our capital, so I appreciated the opportunity to essentially be a silent partner in the investments. The first two investments have gone very well as I have been able to essentially double my modest investment on both projects in just a 7-12 month window. The other projects the partners have completed have all gone very well. They are experienced and adept at identifying quality investment/development opportunities.

Now that the development projects are ramping up, the partners of my firm have decided to formalize the investment fund for select employees into essentially an evergreen type fund. Given the success of the initial projects, I am looking for ways to increase my investment size for the next investment period. I have looked into various types of loans, but haven't quite been able figure out what the best options are for my scenario. I have no personal debt outside of my mortgage on my primary residence (starter home), in which I have roughly 200K in equity. 

The formalized fund requires a 24 month "lock up" period of any funds invested, so I am looking for a way to acquire some capital for roughly that time frame to increase my investment size and grow my capital more quickly. I would plan to recoup the amount of that initial investment (plus any applicable interest) following the 24 month period to repay any amount borrowed, while reinvesting the profits within the fund. 

I am looking for any advice in this matter regarding types of funding which I may not have considered, or advice on what type of loan/borrowing would work best in this scenario. If my plan sounds like a silly idea, feel free let me know why! 

Thanks 

RI

 Hi Ryan,

From reading your post, it sounds like you are trying to access capital in order to reinvest it in the fund to therefore increase your wealth quite substantially. Am I correct in that aspect? If so, there are a few different options you have in your arsenal. You can do a cash out refinance of your property, pull out quite a bit of equity, and use that equity to reinvest in the fund. Doing so, however, will increase your current interest rate (I'm assuming your current rate is a lot lower than what conventional rates are at the moment), increase your loan balance, thereby increasing your monthly payment. You'll have to run the #'s with local lenders in your area to see what you can qualify for and what you're willing to do, but if it makes sense for you, go for it! Another option is getting a HELOC on your current primary residence. You won't be able to tap into as much equity as a cashout refinance, but you can still take some out and pay interest only on the amount that you use. Either options seem to fit your scenario in my opinion, you'll just have to contact local lenders, run the #'s and see which option(s) best fit your comfort level. All in all, both options will give you the opportunity/capital needed to reinvest in that fund. Hope this helps out in some way. Wishing you the best of luck!