I'd like to buy a home soon, and I don't want to wait long enough to save up a proper down payment. I am considering approaching a few wealthy investors I know and giving them a proposition like this...
Example, I buy a $400K home, which requires a $80K down payment. I only have $40K, so I seek an investor to lend me the other $40K under the following pretense.
- I pay the $40K + interest (interest rate comparable to that of stock market or other typical $40K investment) within 3 years, at which point the deal will be done, and I'll own the home outright..
- If I'm unable to repay the $40K + interest within the agreed upon time, the investor automatically becomes a lienholder on the property and is entitled to his original investment plus a % of equity returned if any (this % is part of my question, what we be reasonable, given that I'm making the monthly payments?)
I don't know if an arrangement like this is common in the real estate market or goes by a certain name, i mean certainly i'm not the first person to think of this, so what is this called, and what are the typical terms that the investor would look for?
(assume that I'd be able to get qualified for the loan and that it would be "reasonable" to be able to pay back the 40K in the time specified)
after re-reading, i assume the investor would need to be a lienholder from the beginner under any circumstance...but is that even possible, or would I have to buy the house "with" the investor, which i'd rather not do...
also, do not dwell upon the legal details of the arrangement, i have people that I could do this with on a verbal contract not to mention a seperate written contract that protected their investment+interest in the event I sold the property for a gain...I'm much more concerned about the actual numbers/percentages and how realistic this proposition is from an investment standpoint, not a legal one..
