Crowdsourcing creative deal ideas for atypical partnership

[Derek Kockler]

Hey Folks,

For those of you out there that love the challenge of creative financing, I would love your input and ideas.

I will try and be succinct but this deal atypical so bear with me. First, the property. The property is a 3 story 4000 sq ft triplex that had a significant flood several years ago back. The property is quite near downtown Anchorage AK. Additionally, the property is zoned for mixed-use and can be commercial or residential. ARV is a little difficult as this property has nearly no near identical "comps". But lets say 700K for an ARV. The property is in the process of a major rehab after the flood incident. Let's call it 60% done but a LOOONNGGG way before this property could qualify for a conventional and conforming loan. Now let's meet the players.There are four key players in this equation and we will just call them A, B, C, and D.

A: Possesses the title free and clear of the current subject property. Previously attempted to fix/restore the project but it was too and sold the property seller-financed to their friend 

B: Purchased the property from friend A with really great terms. The loan is for 260K on a 30-year owner financing with relatively little down. Not sure what her interest is but I think it is relatively low. She has about 50K tied up in the project so far and aquired the property in September. Then B got a dream job outside of Anchorage and is debating whether to keep this property and sit on it, continue to slowly put money into it, and hopefully get it ready to sell or partially rent, or sell it outright to a cash buyer at a steep discount. 

C: I will save you the suspense, it's me. You don't come to BP for great reading in suspense non-fiction. I met person B through a local marketplace ad. The project was listed with possible seller financing so I was intrigued. After learning that person B was already seller financing I knew that option was off the table. That's third-tier Russian doll style owner financing. No thanks! However, we did talk about the idea of partnering on the deal. I a, fairly well-capitalized with some private money right now and keen to deploy it. Additionally, I plan to buy a 4 plex this spring, so funding this project and not carrying a loan is quite helpful. The trick is that I am working with person D and have a plan to split equity with them on a project that we partner on. 

D: A licensed, bonded, and insured general contractor in Anchorage. The arrangement was going to be; I find, fund, and acquire the property and person D does all of the work on the repair. D does not have a huge crew and relies on regular income for basic daily needs. So the work four a 60-90 flip would be done at 50% normal rate and then he would be a 50% equity partner sharing profits with me after the sale. 

Still with me? Great! This is where I need your creative insights. How should I, person C, partner with Person B and bring my partner person D to the table as well? 

- Should we all by equal 33% partners because we each brought something to get this across the finish line?

- Should person B get 50% leaving C and D to share 50% (25% of profit each) since she acquired the deal and just needs an injection of capital and management to get it to completion? 

-Further complicating this, I believe that this property has GREAT cash flow possibilities. I would love to hold it long term. Can I get money out without doing a BRRRR and refinancing in my name? The only reason I don't want to refi is that the current terms are sooo good.

There are lots of angles I haven't even thought of yet and am newer to this level of creative financing. So please share your thoughts on how to best optimize this opportunity. Thanks for your time. 

Derek