Funding
How do I raise money for a 15 million dollar apartment complex that I want to buy?
[{"id": "ffeblb9", "text": "I have someone I can introduce you to", "replies": [{"id": "ffebmh2", "text": "Do banks loan out that much?", "replies": [{"id": "ffedpno", "text": "Very rarely unless you have great financial history. I know people with $250 million and looking for projects that need funding", "replies": [{"id": "ffedrhf", "text": "What would they want out of it?", "replies": [{"id": "fff7wfs", "text": "A return on their investment.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "ffee3kt", "text": "Would they be interested in funding 10-30 home developments?  $2-5 million", "replies": [{"id": "ffeeo1g", "text": "I will link their website below. They take project applications", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ffeep1k", "text": "http://difund.custom506cportal.com/", "replies": [], "depth": 1}, {"id": "ffefenh", "text": "All over", "replies": [{"id": "ffeffh0", "text": "PRAGUE", "replies": [], "depth": 2}], "depth": 1}, {"id": "ffefpc3", "text": "Ha ha, US only I believe", "replies": [], "depth": 1}, {"id": "ffernr8", "text": "Do you have any sort of track record of investing in commercial property? How much of the $15MM are you comfortable investing yourself? Do you have a relationship with any local banks? Is the property stabilized, or does it need improvements?", "replies": [{"id": "ffeyk45", "text": "love when people post these broad questions.", "replies": [{"id": "fff1b2z", "text": "Yeah, I mean I don't want to be a dick, but anyone posting this question with this level of detail on reddit likely has no business putting together a $15MM multi deal.", "replies": [{"id": "fff3565", "text": "Sometimes its better to be brutally honest lol, but you're a good dude for at least posting the right questions.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "fff5tuh", "text": "I haven\u2019t invested before. Thinking of going straight into more complex deals instead of starting out with smaller properties.", "replies": [{"id": "fff71a4", "text": "Love the enthusiasm, but you've got a major uphill battle. I'm still missing a ton of details, but for now I'll assume that this is a $15MM stabilized multi deal that is actively being marketed by some investment sales shop *(edit: implying that you don't have an in on some crazy off-market or below-market deal)*. \n  \nWith no track record of investing, you're going to need a big slug of equity to attract a lender. Think $4.5MM to $6MM (30% to 40%). I have no idea how much you have personally to invest, but, unless you've got a serious balance sheet with lots of liquidity, you're going to need to bring a limited partner (LP) on board to cover a big chunk of the equity. Even if it's an option, HNW family and friends is probably out on a deal of this size, so you're looking for a middle market semi-institutional LP. There are a tonnnn of deals out there right now, and those folks are looking at deals left and right. They can probably find someone else with a similar deal with a good track record of success, so you're going to have a very hard time convincing them to come on board. Honestly finding the LP will likely be the hardest piece of all of this.          \n\nThat brings me to the asset/deal itself. Assuming it's a stabilized deal, what is the in-place unlevered yield on cost (NOI/Total Project Cost). Essentially it's the same as whatever the cap rate you're buying it for. This will give you an idea of how much income you're working with to cover your debt payments before you layer in leverage. You want as big of a spread there as possible to keep good levered cash flow and provide you with protection if/when rates rise (assuming it's a floating rate loan). After covering debt payments, look at your cash-on-cash (CF/Equity Invested). How much room does that give you to meet pref payments to your LP? If your levered cash on cash and pref % are too close, your LP is going to be happy, but you're going to struggle to get into the promote and get real compensation without a liquidity event fairly soon.     \n\nI would highly highly recommend either i) working for GP doing investment and/or development before going out on your own if you want to do bigger projects or ii) starting small with quadplexes or whatever you can get your hands on, raising equity from friends and family and using local banks to start. Build your expertise, reputation and balance sheet, and then you can move on to bigger stuff.", "replies": [{"id": "fff8b07", "text": "Thanks so much for this information! Appreciate it.\n\nI just turned 18. Got my first credit card on my 18th birthday and working on building my credit score.\n\nAs for my own money to invest, that is basically nonexistent at the moment. Few thousand but nothing close to the millions that I need for my deal.\n\nI spent my entire break looking at properties up for sale, analyzing the property, factoring in as much as possible to see what the return is and potential gain.\n\nThe only problem I have is that I don\u2019t have nearly as much money required to put down for a deal. \n\nI did considered borrowing from people for the down payment and give them some interest for investing in the deal. \n\nOn one deal I put together, I could take three years of healthy cash flow and repay about 24 investors with a a healthy return. The property was about 5 million dollars. After that I would have an entire complex to myself working to make me money.\n\nI guess in the meantime I could only keep looking at deals but not have the money to execute.", "replies": [{"id": "fff90ky", "text": "Wow, again it's cool that you're thinking about this stuff at 18, but nobody is going to even give you a look without a college degree and/or a lot of experience executing deals.     \n\nI would highly recommend that you focus on getting your college degree in Real Estate/Finance/Economics or something similar, continue to look into properties and put potential deals together for practice, get some summer internships in different CRE positions in areas like investment sales, development, private equity, commercial lending, etc, and then hit the ground running after graduation. If you really want to go after it on your own at that point, consider getting a CFA. Anything to add additional credibility will help.    \n\nIn the meantime, check out a book called [*The Real Estate Game*](https://www.amazon.com/Real-Estate-Game-Intelligent-Decisionmaking/dp/068485550X) by William Poorvu.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fff8xmc", "text": "What\u2019s there to stop potential investors with loads of money laying around from going and buying the property that I am looking to acquire with an investment from them?", "replies": [], "depth": 1}]