How do you structure deals with friends & family?

[Kim Leduff]

Hi BPers,

As we grow our portfolio, our friends and family have started to express interest. We began 1 year ago and have 4 Doors with 2 under construction and the progress has captured their attention. We have heard many of them ask us to clue them in on the next deal and given us a dollar amount they would be interested in spending to invest. 

We are aiming to BRRRR our next property potentially, or find a 10+ unit and the capital they are offering is looking tempting as our investment accounts are getting thinner. They do not want to be involved in the searching, acquiring, remodeling, or managing- they just want to do something with some extra money they have and earn some greater interest or residual income.

We are a bit confused as to how to structure these partnerships and what would be fair and desirable depending on if they want to run it as a loan vs. partnering with a multi-unit apartment and sharing the residuals. Would we want to:

1. Borrow just the down payment and offer to pay that back with a good interest rate over a agreed upon amount of time?

2. Have the partner help with the down payment but then partially own a percent of the property with us?

3. Some other partial residual payback that sunsets over X years?

4. other?

Ideally we would want to own it entirely to be able to run it efficiently and avoid conflicts of management/expenses.  Any tips would be great! 

Thanks in advance!

Kim