Rental Property Investor · Marine City, MI · Member since 2016 · 145 posts · 230 votes
I am curious how some of the more experienced Flippers/Rehabbers structure their JV deals? The obvious one is where everything is split down the middle, but what if I don't have any money and someone wants to invest with me. Is it better to just have them as a private money lender? Or are there benefits to doing a partnership and have them act as the "money guy" and I take on the GC role?
I'm forming great relationships with a steadily growing list of private money lenders. I just did my first deal with a private money lender, and I'd like to continue to fund deals this way as I see great opportunity in this. However, I'm interested in hearing if anyone prefers going the JV route as opposed to just using someone as a private lender?
Investor · San Antonio, TX · Member since 2017 · 344 posts · 268 votes
6y
@John Lyszczyk I think it probably depends on the deal. I've used hardmoney for everything thus but in most all scenarios even with a few points and 12% interest it makes more sense to do that than to split the deal.
I think it also depends on the amount and the nature of the deal. At higher pricepoints I'd be more interested in a partnership or equity split cause those interest payments, and points add up quick on more expensive/lengthy projects.
Investor · San Antonio, TX · Member since 2017 · 344 posts · 268 votes
6y
@John Lyszczyk I think it probably depends on the deal. I've used hardmoney for everything thus but in most all scenarios even with a few points and 12% interest it makes more sense to do that than to split the deal.
I think it also depends on the amount and the nature of the deal. At higher pricepoints I'd be more interested in a partnership or equity split cause those interest payments, and points add up quick on more expensive/lengthy projects.
Investor · New York City, NY · Member since 2013 · 1k+ posts · 269 votes
6y
@John Lyszczyk
Pros and cons to both structures ( loan versus JV)
You will make more profit if the deal goes well by taking on a loan. However you will have to invest some capital and qualify as well as take the entire risk.
On a JV you may make less as will have to share the profit , but you rely more on a capital partner for the funds as well as share the risk if the deal is not as smooth as anticipated.
I am curious how some of the more experienced Flippers/Rehabbers structure their JV deals? The obvious one is where everything is split down the middle, but what if I don't have any money and someone wants to invest with me. Is it better to just have them as a private money lender? Or are there benefits to doing a partnership and have them act as the "money guy" and I take on the GC role?
I'm forming great relationships with a steadily growing list of private money lenders. I just did my first deal with a private money lender, and I'd like to continue to fund deals this way as I see great opportunity in this. However, I'm interested in hearing if anyone prefers going the JV route as opposed to just using someone as a private lender?
The best structure is to position them as a lender with a note and deed of trust just like the bank. You can structure it where they loan 100% of the funds and get either a fixed interest rate or a percentage of the profits paid when the property sells or refi if its a Brrr.
If you take them on as a JV partner and they are totally passive that's actually a security and crosses the line.