Creative Financing ideas

[Chris Stonestreet]

Hey everyone,

I am trying to work on “pitches” for some creative financing, specifically with approaching potential partners in real estate deals. I currently have one rental property and would like to scale but I’m limited by my income on how often I can purchase a property. 

I have a few people who are interested in being the “money people” while I would do the work to find, fix and manage the deals. I’m just not sure how attractive a 50/50 split of profits is for them if they have all of the money down. So I wanted to see if anyone had ideas or examples of things they’ve done in the past such as preferred returns for the investor, etc… 

Thank you for the feedback and excited to continue growing in this community!

[Sanat Bhandari]

Quote from @Chris Stonestreet:

Quote from @Sanat Bhandari:

Offer to do a 75/25 or even a 90/10 split initially, prove yourself as an experienced operator who can execute projects successfully, and then move on to do a 50/50 split eventually once you have the capital and track record to command a larger share for smaller input. Alternatively, if you are dead set on a 50/50 split, you could offer to personally guarantee the debt while their name would be on title but not the loan

I've seen partnerships where one of the parties isn't bringing in any money go sideways more often than not. Make sure you hone in on your value proposition to not just the deal but the team as a whole and try to chip in something, even if it is fairly minimal

If I was the money partner in your scenario, I wouldn't partner up with someone who is bringing just the sweat equity without some sort of substantial skin in the game since it is far too easy in a situation like this for them to leave the other partners holding the bag if the project goes sideways

That’s great advice. I completely agree and understand that it’s important for me to have financial skin in the game. 

 Would you think something like a 75/25 split would be fair even if my financial commitment wasn’t 25%?

It all depends on what you're bringing to the table. If you're not bringing the financial piece of it, you can always promote other skills/services you have that can be beneficial to the partnership. The beauty of partnerships is that it all boils down to negotiation and what you guys agree upon

P.S (Nugget) Never Split The Difference by Chris Voss is a good one to read on negotiation tactics