Making my RE portfolio desirable for private lenders, have we done enough yet?
My goal is simple, I want my LLC to stand on its own feet and continue to flourish and grow while being a very favorable, safe investment to a private money lender with decent returns in hopes of a long-term relationship. Like most people do, I want the most desirable rates, but I also understand the importance of giving the investor the returns and confidence they need in return.
A little over a year ago we got started with an initial cash investment from my personal funds. The plan was to flip properties in our market and reinvest profits into rentals, primarily multi-family. Here is the progress we have made so far; your feedback would be greatly appreciated.
During this time, the LLC has purchased 7 doors (outright- no loans) generating 3700 per month in rents with excellent tenants comprised of 2 triplex's and 1 SFH. Additionally, we have completed and sold 6 SFH flips and our actively completing #7 atm which is about 2 weeks away from completion but already under contract for sale. We have at least 4 -5 active offers (2 accepted) out on off market properties as well. We have a very good marketing campaign which brings us at least 4-5 distressed off-market properties per week to make offers on. We have an amazing partnership with our mortgage broker, we send them customers daily (in response to our marketing) looking to stop renting and buy one of our properties. We now have many qualified buyers awaiting to buy our properties and since we are supplying our own buyers, we have negotiated considerably low closing costs ($0 commission to the buyer side, minimal on the selling side). We are now getting our homes under purchase contract 2 weeks before completion and allowing the customer to make some minor finishing decisions such as paint color etc. Additionally, we have excellent contractors and we turn out a finished product that far exceeds anything available in our local market which allows us max sales price. Things are rolling and the outlook is very good.
This post was prompted by an excellent cash flow investment that we came across right in our desired area at an excellent price. We currently have all of my initial investment available in cash in the account, but we continue to use these funds as working capital to keep acquiring new flip properties so obviously do not want to drain account and stop all of our momentum.
The very basics of this new deal are a pair of 4-plex properties (very nice properties) that generate in excess of 4k a month in rent that I am negotiating to purchase for 175k cash, but actual market value prob 225k+ conservatively. Ideally, we would propose to an investor to fund 70-80% of purchase price possibly 2years term and we would add some very good cash flowing properties to our portfolio. These properties rarely come available of this caliber in this market.
I do own other rental properties personally outside of this LLC, and do not have any mortgages. One option would be for me to simply put more money into the LLC, but I know in order to achieve my vision for this business I will need to have investment money available in the future and I would like to start building those relationships now.
I am hoping to get opinions on if the business has matured enough to warrant the desire from a private investor to make this type of investment without having to leverage my personally held assets or credit etc. Is a first position note on the new purchase enough? Would I need to leverage the other properties in the portfolio to better position for investor? Am I better off infusing more capital into the business personally, completing the purchase and then look to refi my cash back out through an investor?
Again, my goal is too build a long term relationship with a personal lender so that trust and track record become the definitive decision makers years down the road. I would love to know what specifics investors are looking for in addition to what we are currently doing, thank you.
