Strategy for joint venture.

[Chinmay J.]

I had an interesting chat with one of my ex clients who has become a good friend also. He and one of his other business partners want to invest with me in a joint venture. I already have my LLC that is set up for purposes of fix and flip ventures.

When I asked his views on working together, he seemed pretty open minded, but then he suggested that he had inclination towards being on the title. 

He will just be a passive investor. He doesn't know much about real estate, neither is it his area of expertise, so he will be bringing nothing to the table except money. He has no time to spend on this other than talking on phone for 10-15 min a day. I will be contributing all the knowledge, research, talking to subs, dealing with Title Company, dealing with realtors etc. 

So I am thinking of couple of different ways I can proceed with this..

1. Add him to my LLC and have the operating agreement state what his percentage stake is and what roles and responsibilities are. I am thinking 60-40 in my favor.

2. Have him form his own LLC, and buy the property under two LLCs, and have a JV agreement outlying the duties, responsibilities, capital and stake. Again 60-40 in my favor.

3. Just make him a private lender and ask him to lend at 8%.

Option # 3 is the easiest, I know.. But I really envision working long term with this person, and admirer how professional he is. This can be start of something really big in days to come. 

How would you proceed here ! Thoughts?