How much should an investor make?

[Rebecca B.]

Here's the scenario:

Rebecca and Rachel buy a property for cash each putting 50% into it. Rebecca intends to buy out Rachel within 6 months of the sale.

The property costs $55k. Repairs $10k. They put in $32.5k each. Property rents out at $900/month. ARV $80k.

Rebecca gets financing at the LTV 70% and holds onto the property as a rental.

What return should Rachel get on her investment? They're sisters so Rebecca wants to be generous. 

Also, would I be correct in thinking that until she buys Rachel out that they should be splitting the profit from renting it?

[Brit Foshee]

@Rebecca B.

I approach each deal with this simple thought "How can all parties leave this deal happy".  With that being said it really depends on what your sister is looking for.

It looks like on a loan at 70% LTV you wouldn't be able to pull out all the cash you both had in.

Since you improved the property by 15K it makes sense to me that you would split that, meaning your sis would get back a total of $40,000 back ($32,500 plus $7,500).

Yes, I would split rent until the property has been rightly divided.