St. Petersburg Florida Private Loan with a JV Option!

[Edwin Epperson]

Investment Info:

Single-family residence private money loan investment.

Purchase price: $40,000
Cash invested: $15,000
Sale price: $159,000

We partnered with an experienced real estate investor (they had completed over 10 projects with us personally) and we offered a JV option. I call this my VEST'd Member program. We provided a 1st position loan, and I arranged JV capital from my consulting company. The JV capital provided 20% of the downpayment plus 6 months' worth of prepaid interest and all closing costs. The investor brought 10% of the total project costs to the table and they earned 10% annual on that!

What made you interested in investing in this type of deal?

The experience of the real estate investor was the key to this type of structure. Their overall experience but also the personal experience I had with the investor. So many real estate investors are too focused on the current deal and making sure the numbers are in their favor, but not really focused on the relational lending that private lenders look for. Building a meaningful borrower/ lender relationship can help prevent investors from stepping over dollars to pick up pennies.

How did you find this deal and how did you negotiate it?

The investor brought the deal to us as soon as they locked the property up under contract. They bought the property off-market, meaning it was not listed on the MLS. They were a wholesaler that built their team and had successfully moved into the fix and flip space. I had been working with them for many years and I was excited to offer them a unique capital structure that not only allowed them to bring a lot less to the table but also earn more profits than a traditional JV.

How did you finance this deal?

I financed this deal using two structures. For the 1st position loan, I structured the deal as a traditional 1st position loan. We used our Turn-Key Private Lending solution with participation from our capital partners and allowed multiple passive investors to take part in the 1st position. My consulting company provided all the soft costs for closing as well as 6 months of pre-paid interest to the 1st position loan. This allowed the real estate investor to only bring $15K to the table!

How did you add value to the deal?

By lining up JV capital from my consulting company, we were able to allow the real estate investor to bring less money to the table than if they have tied up their capital handling the 1st position loan all them-self. What this allowed them to do is earn much higher cash on cash return than if they had simply done a 1st position loan.

What was the outcome?

The investor accomplished the goal of a quick rehab and had the property sold in just over 5 months! My lending company made their return, my passive investors made hassle-free monthly income, and my consulting company earned a healthy return for taking on the risks of a fully funded project. The Real Estate Investor not only made 60% of the profit but they also earned 10% monthly income as well!

Lessons learned? Challenges?

This was one of those easy, in and out deals that we wish we could replicate every month. There were no struggles or un-expected issues.