Re: Bringing in investors - Posted by John Corey
Posted by John Corey on March 23, 2006 at 07:51:15:
You can keep the deal simple if the investors act as a lender and the deal shows them as the 1st lien holder (mortgage or trust deed depending on the state).
5% cash from you and 95% from them is a high LTV loan. If they have to take the place back they likely will have a loss as 5% is easy to wipe out.
What sort of interest rates are you thinking of offering them? If it is high then you do not want to keep the long longer than you have to. Otherwise it will be wasting the cash flow for no obvious reason.
Why do you want to use private finance when conventional is likely to be at better rates? There are some good reasons. You have mentioned none in the original message.
BTW - If you are paying above normal rates for long periods of time you might be paying out more than if you had conventional rates with up front fees. You have to do the math. If you find you are paying more you are transferring some of your profits to the investors compared to other structures. Definitely not keeping all the profit.