Partnerships

[Buck Tadlock]

As a new investor (only have 2 rentals/fix & holds under my belt) and my credit not being good enough to get conventional financing for investment properties (no foreclosure or bankruptcies & I'm working on repair) I have been wanting to either:
A) try and raise private funds, and/or
B) try and find silent cash partner
In the case of a cash partner - here is what I would bring to the table:
I'm a licensed real estate agent (TX) so that should cut out around 6% of broker fees? I would utilize all my resources to market rehabbed property (paper and online classifieds, neighborhood campaign, open houses, MLS and use the Freedom$soft syndication wizard). I also work with my brother, who runs a home building and remodeling company - so I get some nice discounts on labor and materials. Just basically looking for someone to front the funds and sit back and wait for the sale and receive 50% of the profits.
BUT, how would I go about giving them security? Would it be through a promissory note and giving them first position lien on the property? Plus, I figured if all transaction goes through title company, they would be more willing as opposed to funding going into my hands.
Any help will be GREATLY appreciated! I've got some SFR's locally (Houston area) that I really want to get to work on!

[Jon Holdman]

Yep, just a deed of trust or mortgage on the property. Despite living in Houston for 13 years and owning two properties there I can't recall which they use. Money goes to the title company just like a loan from a bank.

If you're borrowing rehab money, you have a couple of choices. Simplest is to just take a check away from closing for the rehab funds. But that requires a lot of trust on the part of the lender. An alternative is to have the money held back by the lender. Have the title company create two or three checks for the rehab money in your name. But give these checks to the lender. The lender then inspects the work and gives you the checks as the work is completed.

Don't know if this works in Texas, but one way to structure this is a "shared appreciation mortgage". That gives the lender a cut of the profit rather than a fixed interest rate.

Probably want to find a good real estate attorney to set up the paperwork.