Builder Investor Partnership Program

[Brock Holliman]

I have been building new single family investment homes for investors. I wanted to find a way that I could boost my investors returns but still keep it attractive for my construction business to make a profit.

So my idea in summary is:

1. Builder finds lot for investor for 25k

2. Investor buys lot, secures financing, and hires the builder to build the house on the investor’s lot for $170k.

3. When the construction loan has been paid off and the certificate of occupancy has been issued, builder then pays $29,250 (75% of Investor’s down payment) to investor for 15% stake in the property.

4. Builder and investor enter partnership, rent property for $1600, covering expenses and also putting money in their pockets each month.

End result: Investor owns brand new $210k appreciating investment property that cash flows over $200/month for $12,250

See below for examples on deals.

Example 1 - A traditional investment property sale on a new construction

Retail Value: $210k

Sales price: $195k

Loan Amount: $156k

Down Payment: $39k

Closing Costs: $2.5k

Total Cash Invested: $41.5k

Rental Rate: $1600/mo

Operating Expenses: $503/mo

Mortgage Payment: $857/mo

Cash Flow: $240/mo

Cap Rate: 6.75%

Cash on cash return: 6.94%

Example 2 - Okay now this is how the numbers look for the investor in my Partnership Program

Retail Value: $210k

Sales price: $195k

Loan Amount: $156k

Down Payment: $9,750 ($29,250 was paid by the builder after closing for a 15% stake in the home)

Closing Costs: $2.5k

Total Cash Invested: $12,250

Total Property Income:

Rental Rate: $1600/mo

Operating Expenses: $503/mo

Mortgage Payment: $857/mo

Cash Flow: $240/mo

Investor’s 85% Share: $204/mo

Cap Rate: 6.75%

Cash on cash return: 20%

Any readers - please let me know your thoughts on this idea.