Lend small amounts of capital as a lender AND receive investment ownership 

 

• Smaller capital investment per transaction: $15,000 - $50,000 

• 12% - 18%+ annualized returns 

• Monthly Principal and Interest payments 

• 100% of net investment cash flow until repaid in full plus interest 

• 10% - 30% ownership position per investment 

• Maintain ownership interest even after being repaid in full 

• These are great investments for starter IRAs or investors with minimal funds 

• Diversification of investment funds into several smaller investments 

 

With the small balance co-ownership program, the investor gets the benefit of investing in seller financing with smaller amounts of cash.  The small balance investor receives ALL net cash flow generated from the investment until repaid in full plus interest.  All monthly cash flow is paid to the investor after the first mortgage lender, taxes and insurance are paid.  The investment is typically paid back in full within 18-24 months.  Once paid back the investor keeps their ownership interest in the property until the seller financing buyer pays off the seller financing in full.  The investor continues to receive income and profits long after all invested cash has been repaid. 

 

This small loan is provided to the LLC that is established to purchase the property chosen by our seller financing buyer. We set up an LLC to purchase the property. The small balance investor funds 10-30%* of the purchase price. The investor gets a preferred return based on the LTV provided (typically 9-10%). The investor also gets a membership interest in the LLC of 10-20%.  The investor gets paid back on the invested funds by receiving all net cash flow received by the LLC.  The small balance loan is repaid before any member profits are disbursed (just like a bank gets their mortgage payment before investors can take a profit). After the small balance loan is repaid the small balance investor maintains their 10-20% ownership interest and continues to receive cash flow and profits for the life of the investment. 

 

This option is for investors looking for exceptional returns by combining a safe investment for their funds with upside profit which typically comes with the seller financing investment.  This investment option includes providing a small loan to bridge the gap between the first lien obtained to purchase the property and the seller financing buyer down payment.   This loan is provided to the LLC that we establish to purchase the property, not to the seller financing buyer.  Therefore, the loan is secured by the LLC, not by the seller financing buyer.   The members of this LLC are our company and the small balance investor (since the investor is also a co-owner).   

 

If the seller financing buyer does not make a payment the payments to the investor stop under seller financing buyer payments resume.  Interest continues to accrue in the investor’s favor while payments are suspended.  Payments to the investor resume when seller financing buyer payments resume.  If the seller financing buyer does not pay loses the property to our LLC via foreclosure the investor’s loan will be brought current from the down payment received from a new seller financing buyer, or will be paid in full if the property is sold traditionally.  The small balance gets paid before any profits are taken by the members. 

 

Two levels of protection 

 

1. First, payments received from our seller financing buyer (who is making monthly payments and who provided a large down payment to purchase the property) are used to pay this loan. 

2. Second, our LLC is responsible for the payoff of this loan if the seller financing buyer does not pay. 

 

Example:   

Our seller financing buyer provides a 10% down payment; we obtain a first loan of 80% to purchase the property; this creates a need to 10% to complete the purchase.  The small balance investor provides the needed 10% to complete the purchase.  The small balance investor receives a 10% preferred annual return on their investment plus a 10% ownership interest in the LLC.  The small balance investor receives all net cash flow into the LLC until repaid in full, plus interest.  The small balance investor maintains ownership long after the investment has been paid back. 

 

*LLC ownership can vary from 10% to 30% depending on seller financing buyer down payment and amount of financing provided to 1st lien investor 

 

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