Augie 
Posted in 
Tags: 
Who finances your real estate deals? Are you forced to tap your savings or put your credit on the line? There’s no reason to do that when you finance real estate deals with a money partner. By money partner, I mean literally that – someone who is willing to invest the money (and charges interest or gets a piece of the profit) if you do the work. A money partner can move much faster than a bank and help you close fast. You might be thinking, “That’s a great idea but I don’t have a money partner. I don’t have someone that is willing to finance real estate deals for me.”
If you drew a circle around your home 10 miles in diameter, I’ll bet there are at least 10, if not 100 investors that would work with you to finance your real estate deals and become your money partner IF you can show them three things:
- You know more than they know
- You have more experience than they have
- You have been successful
You might be thinging, “I can’t find a money partner unless I’ve done a couple of real estate deals and made money.” That may or may not be true. Frequently, people turn to family members, close friends, business partners, etc. for their first deal or two if they don’t have to finance the deal themselves.
Be very careful on your first deal. Learn as you go. Gain experience. Be successful. Make money. If you have knowledge, experience, and success, and you can demonstrate that you have these three things, finding a money partner to finance real estate deals will never be a problem for you again.
I have money partners that finance real estate deals when I don’t want to use my own cash or credit. These are great deals that put money in my pocket every month and other people put up the cash for them. And they also make money! Remember, using a money partner is a technique that can be combined with any other technique.
And while we’re on the subject, you probably want to take your money partner’s money, and spend it wisely. That is, save some money by cutting the realtor commission out of the mix. If you’re buying or selling real estate, you owe it to yourself to click here!
Link to this page
I’m looking into purchasing a third home, but I’d need a sizable amount of cash to do so. Anything considered ‘investment’ property requires a 20% down payment, isn’t that correct?
Most properties that are non-owner occupied require a down payment. Sometimes as much as 30%. Many times this money can come in the form of infused capital, from an equity partner. Instead of owning the entire property, you own something less but more than nothing. Assuming it is a rental property and a great deal (one with equity already in place) the partners can share the cash flow, tax benefits or in some cases the one with the down payment will actually purchase the property and grant the other an option for 50% in exchange for managing the property and sharing the cash flow. The sky is the limit when it comes to creative financing.
It’s easy to talk to someone else about deals involving money and investment when you are passionate about it, and enjoy the topic, you should be able to market yourself and network easily.
What sort of profit split have you found works well, how much, how soon, and what method? Sell and split equity in 5-10 years, or something better?
Thanks for the question. In my experience, we get paid to solve problems. Those include problems of our lenders. Everyone needs something but not everyone needs the same thing. I ask folks what they need, security? Income? Growth? Timeframe? These are all components of someone’s investment horizon. As far as equity sharing, someone can buy a part of the property based on an agreed upon valuation or appraisal. We usually look for either 25% or 50% interests. This would entitle them to a share of the income, expense, appreciation and amortization. We usually look for a 5 to 7 year time frame because of the current flat/declining market. For those looking for income we might have them buy the property and give us an option to buy in sometime in the future and we can manage and give them the lion’s share of the cash flow and we’ll wait while our option increases in value. This limit is only in the creativity of the principals.
Good luck and happy investing.
where can I find partners willing to help finance super deals that I can locate with 50 to 65% equity already in these turn key properties. Please help me if you can. I can locte these all day long.
Simply ask everyone you know how happy they are with their current investment returns, either from their bank, the stock market, their retirement assets? Most people are disgusted with the bank rates of 1 to 2%, many more have pulled out of the market after losing 30% or more. Ask what sort of returns would they like to see? You might be surprised at the answers. Be sure to have a rock solid exit strategy with the properties either long term holds or resale. Make sure an attorney draws up the paperwork, you provide title and hazard insurance protecting the lender and appraisla is also a good idea until the relationship is well established. Begin with the end in mind because once you have your first lender and they see results they will lend again and again and again. They may even tell their friends how well they are doing working with you that their friends contact you. Some of the best candidates are local entrepreneurs, professionals and people looking to create income streams.
I plan to buy some investment property (an office bldg or other), preferably in pre-foreclosure/distress etc. up to $1.0 M in Texas? I can put 20-35% down. First, how can one find such meaningful/profit driven properties? How can we know the real reason why the seller is selling those properties? How to find loans (balance 75%) when banks are not lending (I am not interested in private lenders/VC”).
Anyhow, what are the “tricks of this investment trade for a person who honestly does not know how it all works, is educated, has decent money to put down etc. yet no results”? Probably, I am not taking the right steps and need expert advice from one of you. Probably investing in real estate should be postponed regardless of all the fluff!!
Anyhow, this note is to seek your words of wisdom and guidance. Bottom line,
- Is this good time to buy when the economy is still in bad shape?
- If yes, can you help me find a viable/honest investment property without any strings attached with great CAP% returns?
- Are there any new programs/offerings that might help a new investor who does not have an LLC/Proprietorship or anything as of yet as he is not done fully exploring it as of yet?
- How to obtain loans thru a reputed bank?
Appreciate your reply,
Raja
interesting article, good read
Try your local real estate investor association or club. They are all over the country. Check out NationalREIA.com they have member associations all over the country.
[…] http://creativerealestateinvestingguide.com/2009/02/24/financing-real-estate-deals-with-money-partners – Financing Real Estate Deals with Money Partners | Creative Real Estate Investing Guide… Today’s preparation determines tomorrow’s achievement. …Bookmarked and Pinged by http://www.imagebuilderads.com/ [...]
looking for a cash partner, where my real estate business can get off and running…Can you call me and give me some advice or even a avenue to follow…
Simply talk to everyone you know. Someone has money that is not getting the kind of returns they’d like. You can offer them a good return, with solid collateral and a low loan to value. The key is in learning to have the right conversation.
Happy investing!
Carlos, for your financial side of the business, if you run out of friends and family to network with, put an ad in your local newspaper. As Augie said, if the “right conversation” is used, and the right offer is made, how could anyone refuse? There are investors lining up for good returns on money.
One word of caution here, there are laws in many jurisdictions which dictate to whom and how offers about borrowing and lending may be advertised to the public. Be sure to check that out before running any ads and learn what is acceptable. You can also talk to an SEC attorney for guidance. This is one of the reasons I prefer to work in a more one on one manner. Besides, we’re always meeting new people and expanding our network. You can too!
Thanks for sharing this information. It helps me gain more knowledge about making money through Real State.
A great blog post here and an excellent example of leveraging any high quality experience that you might have to encourage other people to work with you. I find, with this sort of thing, that its essential to get to know the potential people you’re going to work with by spending some time with them socially to find out how they react to different situations.
Such a actually excellent discussion you all have happening. I like the mix of good and correct details together with a few intellectual thoughts. It truly is fantastic to be able to finally come across superb articles where I think I could believe in the text in addition to respect the individuals that publish it. With all the web waste nowadays I always value finding some real voices on the internet. Thank you for posting and continue the great work, please!!
Thank you for the kind words. Please tell your friends about us.
To your success…
Augie
After first reading this some time ago there have been many opportunities in the market to take advantage of this sage advice. I know I personally have gained and expanded my business property portfolio since first reading this. I hope, and I’m sure I’m not the only one to have benefited financially from this.
Thank you for the follow up report!!
To your continued success…
Augie
Great tips in expanding business. Business can be tricky if we don’t know how to deal with it. It’s like a game that we need to learn how to play. Getting the right partner is one of the techniques and will help expand the business. This is really true for starters. Thanks for the information. Keep it coming.
You’re welcome. The purpose for this blog is to help people learn to invest creatively, safely and profitably. Working with partners thr right way can be a great way to build a symbiotic relationship that builds wealth neither party could create without the other.
To your success…
Augie Byllott
Can mortgages be incorporated into deals like this? Or is it usually a total cash deal?
There are as many ways to structure private financing as your creativity will allow.
Happy investing…
Augie
Regardless of the type of loan or financing you must protect your assets and be assured of a safety net should challenges occur. I am particularly fond of insurance as a form of protection should my investment not fulfill its original projection. Equally, your partner may require a unplanned settlement, so you must be prepared for unexpected change in circumstances in order to minimize the risk.
I am looking for a private investor in multifamily housing. I have been in this business for 10 years. I have been employed with a company and done many deals for them now its time for me to make the money. I have talked about this with everyone I know of and can not find anyone with the cash. Im looking for about 1m. In my experience a deal could turn the investor an estimated 150% return in 5-7 years.
I am down to basically no options now except going to a service like funded.com or the go big network. Does anyone know anything about these 2 companies? I hate to spend money to join these sites and they not be what I am looking for. Can anyone help with information on these sites or maybe have other alternatives I can seek out?
It depends on the lender. Private lenders, banks, hard mony lenders all have different requirements. The are no hard and fast rules. Why not, find a motivated seller willing to provide owner financing then you have no issue with traditional lender requiements. A motivated seller may be willing to accept a smaller down payment. They might be willing to accept it in installments. They might also be pretty flexible n the interest rate. Motivated sellers sometimes make the best lenders!
I want to do commercial investment , any idea which will be the best..?
It depends on your experience level, risk tolerance and goals. Multi-family residential is in vogue right now with the number of families losing homes to foreclosure. In some parts of the contry there is a strong desire for storage units. Strip centers and big box are very location dependent. Industrial is way outside my expertise. The key is decide what it is you are looking for (back to goals) and determine which will be the best fit for you.
Happy investing,
Augie
Thanks a lot. Good topic.
I agree that partnering with a cash rich partner is a good way to get into property investing when you find it hard to get credit from the banks.
However, you need to make sure that you and your partner sign a contract so it is crystal clear the terms of their investment and the profit split – a handshake is not good enough and we have seen too many investor partnerships crumble because there is a disagreement about who owes what and specific respobsibilities. Get it in writing!
Good advice Augie but hardly anyone will act upon it. It’s easier than most people think, I have done it but have friends who have been talking about it for years…. meanwhile my investment has almost tripled, they’re still talking about it!
You said:-
Be very careful on your first deal. Learn as you go. Gain experience. Be successful. Make money. If you have knowledge, experience, and success, and you can demonstrate that you have these three things, finding a money partner to finance real estate deals will never be a problem for you again.
How true. Except in my case that was my intention, but I ventured into the arena just at the peak, and then everything went the wrong way. I have a couple of family “money partners” who are still in it with me, but likely never again.
~Tyler
I can appreciate the situation you describe. While markets will cycle with peaks and valleys we must all buy with discipline. What are the criteria that helps to minimize risk.
1. Asset quality
2. Terms of the financing
3. Will the rent cover the expenses
Don’t buy for the purpose of appreciation (you cannot control it) you have more control over things like income (from rents), amortization, use and tenant quality. These should be your focus. Good luck with your future investing.
Augie
Sounds like you had a great deal Johnny…do tell us about it1
Thanks,
Augie
Good advice about focusing what you can control, (rent, tenant quality etc). While appreciation is great when it happens, but the markets can make it pretty fickle. Much better to invest with the tangibles in mind.
“I have money partners that finance real estate deals when I don’t want to use my own cash or credit. ”
I did not really think this was possible. Thanks for the information and having a money partner does sound better than using personal cash or credit.
My investor is always to busy! Do you know where else to look for one?
Brett
If your investor isn’t available, maybe you’re not getting or giving them what they are looking for. Make sure they want to be your investor and if not, learn why not. Ask if they have any friends or referrals for what you might have? Just keep talking to people in your circle. Be sure their perception of value and yours are in line. You may see an opportunity one way while they may see it another. The key is to understand and meet their needs.
Happy investing…