Posted by John B. Corey Jr. on July 14, 2005 at 18:53:35:
Bill,
I do such deals. Send me an email.
To all the others reading this. Notice how Bill presented things.
He implies that he will go up to 2 points for 6 months as if borrowing on such terms is expensive. Then he offers to split the profits as an alternative with the implies profit being $100K.
Most people think hard money is expensive but are very willing to split the profits. In most all cases there where is any real profit, the hard money solution is a lot less expensive and leaves more profits in the pocket of the person who found the deal.
Run the numbers and you will find that hard money for 6 months costs less then 50% of the profits. Even hard money for 12 months will cost less then 50% of the profits (if there really are decent profits that are worth splitting).
John Corey
Chelsea Private Equity LLC.
A litmus test. If the HML option is more expensive then you likely have a deal that lacks enough profit for the deal to be a ‘deal.’ Not 100% of the time but a good test to run before you get the property under contract.