One more pillar for long term success

[Account Closed]

For years I have been investing in rental properties. My experience has always been with single family properties. I have also managed apartments and have always managed my own properties.

This year I have been working on branching into apartment rentals. Financing was an important consideration and I am glad that I found lenders willing to work with me.

Today, I finally found a private lender willing to invest in my deals. It is a friend of a friend kind of relationship and know that I invest in RE. They are offering 12% simple interest money with no fees that they would rather see paid back as interest only. It has taken some time for me to build relationships and finally find someone that can provide money like this.

[Bill Gulley]

Hi Charles, well congrats in finding someone, didn't see a question there....so I'll assume you might be asking how you might set that up.

If you can afford it, take all they have and no more than you need. Collateralize it with owned properties, not the properties to be acquired (at first).
You can make your note a future advance note, in the event you ever need more. Interest only, say a five ten year balloon and no prepayment penalty.
WIth your other properties encumbered you can buy new properties and then assign the needed collateral and release the other.
Now, there is a scam type deal out there that has an agreement where a borrower can substitute collateral at will, at their whim and on any property they choose, very dangerous! COllateral assignments must be agreed to by both lender and borrower and you have an agreement as to what will be acceptable, like based on a purchase price or appriased value, which ever is lower, would be conservative. Most likely you will be seen as the expert in your arrangement, so in the event anything blows up, having agreements that are conservative and customary will be good for both parties, IMO. Any ideas? Good luck, Bill