Raising Private Money – Debt Partnership

Create your own program to raise money for your deals, using debt partnership.  There are a few tips that you will want to keep in mind.

1. Don’t assume that your debt partners have any experience doing debt investment.  They will be looking to you in order to have it done right.

2. Debt partnership is based on the trust and credibility that you give to the potential partner.  People can smell desperation, so make sure to convey the message that you are the prize.  They need and want you.

3. Debt partnerships are not often amortized like a typical mortgage, it is usually calculated as simple interest

4.  In order to figure out what interest rate you should be offering to your debt investor you need to first calculate your own return on a property, then their return on the investment.  Most of the time what you are offering is simple interest.  So 6% simple interest for 2 years on 200,000 would be 24,000 or in other words 12% cash on cash return.

5.  Build into any debt instrument that you get from a partner, an extension clause.  This could boost the interest rate after the first year from 5% simple interest to 6% simple interest.