Private Funds

[Russell Gronsky]

Ever since I started on BP and the BP podcast, I've been grinding on getting my RE business running faster. I've been told by some friends of mine they are interested in RE investing but want to take it slow. So, they want to fund a deal or two before purchasing investments of their own. 

I'd like to go in on a multi-family deal. Since they want to play the role of the bank, I'm more than happy to oblige since I want to own/manage the property myself. How do I go about making a win/win deal for me and them?

I would ask them for the money for a down payment since and take on a commercial loan myself. Would it be a good deal for both sides if I offered to give them a 15 year, 5% fixed interest rate deal with no pre-payment penalty?

Excuse my ignorance in commercial properties and private funding. This is new territory for me and I'm just brain storming. I'd love to hear about other deals that would benefit me and them.

Thanks.

[Ned Carey]

@Russell Gronsky the more seasoned a lender is the higher interest they are likely to want. If someone knows hard money lenders charge up to 15% they may not want to lend at 5%. But if you offer to high a rate to an unseasoned investor they may think "This is to good to be true, it must be a scam"

I have paid 8 to 18%. I don't know that you can just go by an average. It is a negotiation. Ask the lender what they feel would be appropriate.

I would be tempted to have them as members of the LLC that owns the property and have their return be a fixed rate. The I would include a buy out agreement. All this would be in the operating agreement of the company.

Of course this is how  I might handle a similar situation. You should contact an attorney for legal advice.