I am located in Mexico and have 2 vacation rental properties that I have a acquired through long term leases that I have then turned around and rented short term with the owners permission. The profit has been phenomenal and I would like to expand. My expenses when acquiring new properties consist of the deposit and furnishings, which usually only take about 6 months to get back. I have proven the concept and would now like to set up a business name, website, etc. My question is this: What is the best way to borrow money so that I can expand more quickly? I have many people interested in the business and would give me money but I want to make sure I am not giving the farm away. Any advice would be greatly appreciated.
This is a super interesting business, probably listing your properties in Airbnb you can get high quality (high paying) customers.
On the raising for the business itself, I would do a mix of a loan + share of benefits. For example you get X on a 5% interest a year, and if the property makes more than 50% profits over ROA then you give a Y%. This way you make it safe for the people that are investing (with a sure return) plus a nice bonus if everything goes well. If things go bad, then you know the max you might pay is X * (1+5%) which you can diversify between several properties.
This is just an idea, and a way to get the people that give you the money a good deal. Remember that the important part is that everyone is happy, if not, on a model like yours which is low in capital investment, but high in need for cash flow will have limited growth without future investors.
Answered 6 years ago
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