What to Pay Investors that Contribute to Your Investment Property Business |
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What to Pay Investors that Contribute to Your Investment Property Business

The cost of owning real estate is expensive depending on the person that you speak with. There are some people that think $25,000 is too much. Everyone lives differently and the budget that you have as an investor could fall short of the benchmark that you set to begin investing. When this happens, seeking outside investors is one way that you can afford to invest in real estate. There is a problem with this method though. It involves knowing what to pay investors that contribute to your investment property business. Is 6 percent enough? Isn't 8 percent above the industry standard? There are a lot of opinions that you can receive on how much to give an investor above what he or she agreed on to help you.

 

How to Pay Investors

When you understand the following concept, you will not have too much trouble finding funds to invest. Investors invest to earn a profit. It's that simple. They don't invest because you are a nice person or because you are a friend of a friend. Investors are in business to earn a profit above what they pay someone else. This is no different than banks or other lenders. What is different though is the rate of return that most investors expect. You can forget about someone being happy with 1.5 percent or something like what a money market account would give under normal circumstances. Average investors expect a rate of return between 5 and 8 percent. 

Your real estate business can be operated how you see fit. When seeking money from someone else, you should be clear and up front about control of your investing activities. There are two types of investors. The first are those that give money and remain quiet although they expect a profit within a certain period of time. The second type constantly questions your judgments and wants to make sure the money you are given is going to be used wisely. It is up to you how to decide which investor to choose. One rule of thumb is that if you find someone willing to let you call the shots it might be easier to complete your first real estate deal. You could achieve profits faster and it will be much easier on you.

 

Raising the Profit Percentage

What do you do when you need more money? That could be an issue if you search for private investors and one or two back out of a deal. One simple way to acquire more funding is to raise the profit percentage to one or more investors. If a couple of percentage points are keeping you from a deal, you can raise your initial offer to help you seal up the funding. This will of course lower your annual profits, but you have to remember that you might not even purchase a property without investors to help you. Learning what to pay investors and how to give them what they ask for is one of the traits you'll need as a real estate investor.

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