All Forum Posts by: Jeff Studer

Thanks Clayton-

Yes, I've given that some thought and may pull out some equity on my primary.  I do have 2 partners lined up for financing but I'm also seeking a 4th because one of them had to pull back on the amount of capital he could put in.  I'll continue to try and raise capital with friends and other contacts.  I've just found it difficult to get people to are not already in Real Estate, to consider an alternative to 'non-traditional' investing. 

Have you ever partnered with other investors on rentals?  If so, do you mind if I ask how you structured the partnership agreement as well equity/cash distribution?

Here's an example of how mine is structured but I'm open to suggestion:

Purchase price 140K

Down Payment 28K

Rehab 6K

Closing Costs 4K

Working Capital 2K

ARV 115K

Initial Capital Needed:  40K

Me: 10K (25%) and on the mortgage

Return:  32% initial/future equity stake as well as positive cash flow (after Cap Ex fund is fully funded).  I plan handle all of the.           - partnership agreement paperwork

- corporate entity paperwork

- acquisition process 

- rehab

- leasing, marketing/management of the property

- maintenance 

- accounting and tax doc prep

- I would also be paid $100/ for property management duties 

#2: 10K (25%) and on the mortgage 

Return:  28% initial/future equity stake as well as positive cash flow (after Cap Ex fund is fully funded).

#3:  10K (25%) - 20% initial/future equity stake as well as positive cash flow (after Cap Ex fund is fully funded).

#4:  10K (25%) - 20% initial/future equity stake as well as positive cash flow (after Cap Ex fund is fully funded).'

This would be my first partnership so, although I think these terms are fair, I would welcome other opinions out there and other examples that have worked for BP members.

Thanks again 

Jeff

Hello BP-

Can anyone offer advice or the best ways to raise capital for long term rental aqusition?  I currently own/manage 2 and have been successful doing so over the last 8 years.  I would like to add to my portfolio this year but don't have all the capital I need for down payment, rehab etc.

Any advice would be appreciated.

Thanks

Jeff

Hello BP Members-

I currently own and manage 2 rentals in my local area.  I've owned them for 8+ years and although my initial plan was to purchase 1 per year for 10 years, kids, work and other things got in the way! :)

With the strict lending standards (which are great for keeping the riff raff out) I'm not in a position to fund a 20% down payment along with rehab and closing costs. 

I'm looking for someone with available capital to help fund a % of the down payment (would use traditional financing), rehab costs, closing costs etc.   In return, they would receive a % of the initial/future equity growth as well as cash flow. I would handle all aspects of acquisition process, partnership agreements and financing as well as the rehab of the property and property management duties which really helps keep costs down as I'm sure you know.

As much as I would like to search for great deals and do extensive rehab to gain a large chunk of initial equity, I just don't have the time and don't like to take on a ton of risk so I'm really an MLS buyer looking for lipstick rehabs. There are plenty in my area and the rental market is very strong here.

I know my market very well (Canton, GA) and I'm normally able to rent the 2 properties I have, when they are up for rent, within about 7-10 days.

I already have 2 partners lined up but need a 4th so I'm looking for an investment of around 10-12K at the most. We're preapproved for financing and I have contacts in all phases including legal, mortgage, insurance, RE agents, contractors so it's really just a matter of plugging another house into the template and watching the equity and cash flow grow! 

If you have some interest in this, PM me or call me so we can discuss the details. I can also send you an example of the deal analytics as well as the investor return projections.  

Have a great night and I look forward to hearing from interested investors.

Thank you.

Jeff

The APR is fixed and the private lender is in first lien position. The borrower would not be putting any money down but has a team of underwriters and construction experts to make sure that 'they buy right'. The property is actually the loan collateral and was mostly likely purchased at a price = to 70-75% LTARV (Loan to After Repair Value). Not every project they do yields a profit for them because even the best underwriting can't plan for unforeseen fluxuations in rehab costs and market value but when you do as many projects as they do, being profitable on 3/4 of their projects still makes the numbers work for them, long term. The beauty of private lending is that the investor receives his/her principle and interest at a fixed rate, upon the sale of the property, whether the project(s) they fund are profitable for the company or not.

Agreed, Don.  That's why I recommend keeping the money in play for a full year, financing 2-3 consecutive projects. 

Hey Marty

We're actually looking for private lenders meaning that the lender(s) are actually 'the bank' and do a short term hard money loan to this particular investor. A promissory note is executed with a defined amount loaned, an agreed upon rate. The lendor(s) then get paid back their principle as well as any interest accrued after the project is completed and the property is sold. Because the average project time is 3 months, it makes the most sense (in my opinion) to roll the money over into a few consecutive projects so you can see a full 12 months worth of interest and receive the full 10% APR. It would be a prorated APR return if you only had your money in play for a 3 month period.

Hope his makes sense.   Give me a call and we can chat more about it 

Thanks 

Jeff

Hi Julian

Thanks for heads up. What I meant was, when they do their due diligence, prior to acquisition, they shoot for a 20-25% gross margin when they sell (or 75-80% LTV) after the rehab has been completed.

Example:

Property Price - $50,000

Rehab Budget - $25,000

Total Cost (financed by private lender) - $75,000

ARV $100,000

So the LTV is $75%

Gross margin (profit) is 25k or 25%

Hope this makes sense.  If not, or if you have any additional questions or interest, just let me know.  Thanks.

Jeff

Hello BP Members-

I am working with a prominent short term Fix & Flipper based in Atlanta, GA who completes roughly 8-10 projects/month.  He uses Hard Money for some projects but prefers Private Lenders if possible. 

- Typical APR on is 10-11%

- Average Project Time is 1.5-2 Months

- Average Time on the Market Until Sold (via retail/FMLS) is 1.5-2 Months

- Average Capital Needed Per Project is 150K

- Can use Cash or Self Directed IRA and can roll funds over from one project to the next to yield a full year or more of accrued interest

- The property itself is used as collateral and lender is in first lien position.  

- Company utilizes strict purchase guidelines. 20-25% LTV, post rehab, is typical.

- Company has fix/flipped over 600 properties in the last 11 years and will be featured in the upcoming season of a well know "flipping show" on HGTV.

If you are interested in being a sole or partner, private lender for upcoming projects, please contact me so that we can discuss details and answer any questions that you may have.  If you would like a hard copy investment prospectus, just send me your address.

Thank you,

Jeff

It does.  Thank you Alex!

If you think it would be helpful to you, I created a working spreadsheet that calculates COCROI and approximates how much CAPEX should be set aside each month based on the age of the home. If you would like a copy of it, just message me with your email.

Thanks again

Jeff 

Thank You Shanel and Jeff!  I appreciate your help.