Common Investor Questions: Answers for Real Estate Funding
Raising private capital for real estate deals can be exciting, but it often comes with the same questions from potential investors (or “cash providers”). These are the queries we get all the time, and here’s how we answer them transparently to build trust and turn potential into reality. Whether you’re flipping properties, handling rentals, or refinancing, let’s dive in.
Q: How and when am I going to get my money back?
A: This is where we always begin, as it’s foundational to building confidence in our partnership. We proactively source and curate high-potential real estate opportunities, presenting them to our investor team for seamless execution. All investor funds are securely managed through a reputable third-party escrow service, ensuring transparency, compliance, and protection throughout the deal lifecycle.
For our fix-and-flip projects, the core of our strategy, your capital is repatriated promptly upon project completion and successful sale of the property. We structure these deals with a defined timeline, typically targeting a 3-6 month hold period, after which proceeds from the sale (net of costs) are distributed directly to you, often including a targeted return on investment. In the case of whole rental acquisitions, we outline a robust exit strategy, such as a future refinance or property disposition, with projected timelines shared upfront to align with your liquidity needs.
We’re always prepared to walk through the specifics of any deal, including projected cash flow waterfalls and contingency plans, so you have full visibility into when and how we’ll execute your return.
Q: What are the risks?
A: We don’t sugarcoat it, there are risks with any investment. The rental market could crash, tenants could stop paying rent (lowering or eliminating cash flow), the flip may not sell right away, interest rates could rise, and more. We tell you clearly what the most likely downsides are and how probable they may be. Most important, we explain what we’re doing to mitigate and avoid those risks. For example, our fix-and-flips are listed 5% below market price, and our rental projections include a vacancy rate. We’ve thought these through and have plans to work around them, we’ll show you exactly how.
Q: How much of your own money are you putting in?
A: This comes up a lot, and we’re always ready. If we’re investing our own cash, we bring it up early, it cuts through concerns and shows our skin in the game. Investors love seeing that we’re putting our money where our mouth is. If we’re not coinvesting alongside you, that’s fine too, don’t worry, we frame it as sweat equity: the value we bring through our expertise and effort. Even if we’re borrowing from a bank (with personal guarantees), that’s a major commitment. We focus on the value of our involvement so you can see why we’re all-in on the deal.
Q: What if I need my money back?
A: First things first: Real estate investments aren’t liquid, it’s tough to get cash back quickly. We educate upfront that you shouldn’t fund deals you might need soon for other needs. Investing takes time and rarely goes perfectly to plan. You likely won’t get your money back until the project wraps, unless we find someone to buy your position. If we sense this is your last dime without a safety net, we’ll flag it, it’s our duty to protect you.
Q: How does this affect my income taxes?
A: If you’re new to this, we’ll walk you through it: Earnings from our deals are taxable. You’ll get a 1099 for interest on loans and a K-1 for partnerships. We have a top-notch CPA on our team to make this seamless. They’ll even explain the process if needed, keeping things easy for you.
Q: What are the logistics?
A: We get variations of this all the time, folks want the nitty-gritty on how funds flow, protections, and docs. If you have an IRA, we’ll guide you through setup. New to lending? We explain mortgages and liens simply. For equity deals, we cover operating agreements and how they safeguard you. We ensure every I is dotted and T crossed so it’s crystal clear, no overwhelm here. If questions linger, we’ll clarify until you’re comfortable.
By tackling these head-on, we show we’re prepared and committed to your success. Ready to chat about a deal? Contact US
