Everyone likes a great deal. You may have everything in place to put together a multifamily deal but do you know how to make it a great deal? Do you know how to do it in such a way that it will not cost you too much? Here are some great pointers on structuring your multifamily deal.
Structuring your multifamily deal is creating a deal that allows the private money source to feel comfortable with the amount of control and allows for minimal risk. The first thing an investor is interested in is whether they will get their money back. Or they are interested in the preservation of their capital. Both of these concerns address the investor’s comfort level of the deal. What you need to focus on is publicizing the features of your deals that provide control and low risk for your private investors.
Control means such things as the private lender or investor never releases the money until some promised event has occurred. For example, the lender or investor only releases the 20% down payment to an escrow at closing rather than to you directly. Another method that allows the lender or investor to have control is to have the lender only release rehab monies when they have certified that certain parts of the rehab are complete. This is part of the strategy of preeminence. You are showing your private investors that you thought of their interest when you set up the deal.
Low Risk means that the investor believes that their investment is secure. This is one of the great things about real estate because you have a hard asset that serves as collateral. Part of the security comes from the loan to value ratio because that is a hard asset and in the worst case scenario, if you don’t perform to their expectations, the investor can get access to the property and that redeems their investment. For income producing property, the primary indicator of value is how much income it produces which is easily ascertained.
The more time you spend on Control and Low Risk, the less time you will have to give in return. If you are setting up your multifamily deals from the start to allow your investor to have a sense of control as well as allow them a low risk comfort level, then you will save yourself time later on. Your goal is to set up a deal in such a way that the person involved is better off even if they do not buy from you.
Lance Edwards is living proof of his mantra that you don’t have to “graduate” from single family to multifamily – you can start with multifamily; using none of your own money and not dealing with tenants and toilets. For FREE information, visit http://www.ApartmentWealthMachine.com.