Have you used a Private Investor?

Hi Dave

Hate to say i think it unlikely as it all boils down to risk.

Why would an investor want to lend you 10% or similar and risk loosing his funds on a second mortgage when he / she could do the deal themselves.

In saying this of course nothing to stop you looking at doing the deal with the vendor leaving say 20% plus yours costs in the sale and then you paying him/her off over say 5 years.

This sort of deal is fairly common especially if you can find the right motivated Seller.

Good luck.

its a common thing to use private investors.

u do not need any money yourself to use them,the reason investors use u to do the deal is they have money but no idea,but they want a return on it,so they use smarter people like you/me/ others to invest their money into projects.

u will need to do some form of feasability to present them on the deals merits
the return on investment that u both agree on- possible private returns might be flat % return,certian % over bank rates with a ceiling,fixed cash amount,equity left in a portion of the property for them,one of the dwellings (units for eg) etc etc,u will pay 10-15% most likely on private money most likely so keep that in mind.
time frame of investment
exit strategy for u both(if necessary and asked for)
the security be it – personal assets/business assets/equity/caveats/2nd mortgage etc etc

u must get this done in a contract by your solicitor.

dont be afraid to use other peoples money,the more u can use of their money the higher returns on your own investment u get.but u pay mroe for the money than from a bank.

also u must specify the risks for each party.

a money partner or investor as u want shares none of the risk if the project bombs.if it fails u owe them/the bank/the vendor and anyone else u owe from the project.a joint venture is more shared/divided risk and each person can be liable for their own portion of investment and failure.

as for where to find them,i suggest u do jenniebrown.com.au bootcamp /mentoring/club as i learnt about all this in that.

start with friends/family/sporting friends etc,i found my first partner (which i lost to neg gearing shit) who was form tennis comp and was investing 200k or so with a fixed return with plans for us to do some duplexes.

point of that is,u can find people with money everywhere with no idea of how to spend it.be professional with your approach and feasabilty,fair with your returns and properly contracted and u will get someone im sure.

dont forget,u cannot present this type of thing to more than one person at a time,cant present to a group of people or its financial advising and against the law.so be careful how u apprach people is my advice.

what are u looking to do? developments/stratas/sub divs/reno's?

we are currently doing few feasabilties on renos and thinking of buying a 260k property and trying to use maybe 200k of someone elses money.have to find a new partner aswell though so we are in same boat as you.

u really need to build a network and surround yourself with property minded people u can use to your advantage.

jas

yes,our broker actually said he can get a hold of private money should our projects be a bit "out of the ordinary",for eg buying units on one title,strata them and resell.which is very difficult to finance over a very short period.

but yeah,try craig mills at approvedfinance or ur local broker,just get urself into a mentoring program etc and then use that to network from person to person to find people.

cool thanks for that I just had a look at his sight and I will contact him later in the week to see what he has to offer

Thanks

Hi Dave

Yes what i am saying is that without other security no private lender is likely to lend you 100% of the purchase price / valuation unless of course they are the vendor and it is done by way of an instalment contract.

Sorry Richard, I misunderstood you. Thought you meant 10% private investor or 20% vendor finance, but you meant both.
If Dave has servicability for his PPOR mortgage plus his new bank loan, which it sounds like he doesn't.

Dave, the trade-off for a private investor usually would be that he provides much of the funding, while you contribute the time. But I still think the private investor would want you to have a demonstrable track record especially in a sizeable deal. Or else, he's put money up which he could lose, and you haven't. (And don't want your house up for collateral.) 

Other things to consider in your costings is water, sewage, electricity costs. DA fees for council. Land surveyor, town planning costs. Plus extensive driveways, fencing etc will not be included in building. Stamp duty and conveyancing to buy, conveyancing and agents costs to sell. Maybe more I can't think of now.

How certain are your minimum sales prices? Are similar properties selling at $450K off the plan, now? (Maybe, just be sure you're not being too optimistic.)

Please don't get me wrong, I'm not saying not to go for your dreams. Just make sure that it is do-able and finish-able on your financing, that you can complete.

You are right in saying banks are cautious about loaning to self employed people, even with good  books and plenty of work expected ahead.

The more deals you look at (in detail), the more you learn. And you'll be able to assess costs etc more readily. All good research. Keep knocking on every door of opportunity!

quickchick