How to handle pool of individual investors - Posted by Scott (ATL)
Posted by Scott (ATL) on February 22, 2000 at 11:17:12:
I’m not sure how many people saw an earlier post of mine but our first property (Closed Jan 3) now has a contract (Never went into MLS listing…I hate having to pay a commission but our realtor certainly did his job and deserves every penny for getting us the price we wanted within 1 month of purchase).
Anyway, we are focusing on rehabbing properties at the moment and this one is going to give us a nice profit. We were going to close by the 29 but we couldn’t get a few things done in time. Since it is FHA we’ve got to make the changes/upgrades before closing. Anyway, we’ll close on March 15th instead.
Now for my question…Since I have a number of colleagues and friends that know that we’re doing good work here and making money they are interested in investing some of their own money with us. Now, our current investor (one individual) can only provide so much capital and I would like to pool some other money to get us all the money we need for future purchases and fix ups. The possible investors I have would only be able to put in about $1,000 to $50,000 each. Now if I want to maximize my pool of cash what are some ways to provide me with what I need (cash) and give the investor something?
I know I could just write promissory notes. For smaller amounts this might be the best. No collateral just an IOU with a fixed interest rate. If I do this, what interest rate is fair? For this 1st deal we were taken to the cleaners (Flat 15% for his money in 6 months) but we needed cash within 24 hours and we didn?t have a track record. Our main investor knows he won?t get the same deal again.
For those investors that want to put higher amounts in 10K or more maybe I could give a second on a property but if I have a ?main? investor and 2 or 3 smaller investors I can?t imagine that a ?4th mortgage? is going to be too appealing to the last investor.
We are buying the houses under an LLC so we don?t have company shares to sell?Then again even if it was a C corp I?m not sure I would want to sell shares to raise the capital.
Am I asking the right question here? I?m just not sure how I can get money from everyone without having to pay a fortune but also give them a solid reason to ?give? me the money. Any thoughts are greatly appreciated! Obviously, this is a good “problem” to have!