Making Sense of Raising Capital

[Zayin Lake]

Hello Everyone,

     My name is Zayin and I am dead set on buy and hold real estate for reaching Financial Freedom. I currently work as a credit analyst for a local bank, so I understand lending from a banking perspective. My friend and I are interested in entering a partnership to build real estate wealth together. I have been reading books like crazy, watching Bigger Pockets on YouTube with other podcasts like Choose FI. But I am stuck on the raising capital side of real estate. I am currently reading, The Art of Raising Capital by Darren Weeks. While there is good information there I still have questions. 

My primary questions being, how in the world does private lending work? I understand that the terms to lending with an investor can be set any way that you could possibly imagine. But I have yet to work out on paper a senario where I am able to offer a lender between 5-8% return on investment, while still making money from the rental property. For instance, if I get a property that meets the 1% rule for $50,000. My partner and I bring $10,000 as a down payment and then find a private lender for the remaining $40,000. At a reasonable 5% interest amortized over 10 years (which from the aforementioned book should really be 5 years) that is a yearly payment of $5,091.... If you take that away from the yearly rents of $6000 (1% a month) that leaves $909, take 20% out for repairs and the like (which from what I read is like the bare minimum you should take out for repairs) that totalling $1200 your now putting all the remainder into the repair account. With no equity to HELOC and now our personal capital back to zero, how do we being to roll into another property?

    $909 a year into an account for repairs is nothing in the envent of a single major repair taking place. So now we have real estate that in ten years in the best case scenario will be ours. But I feel like we should be able to reach FI before 10 years. I have seen many people on bigger Pockets that have bought 5 rentals in their first year, how is that possible? 

     Working at a bank I understand we can offer better rates, longer amortizement, the only issue being, if you are doing real estate right, you should not pay taxes. Well, I as a credit analyst look at tax returns both personal and business for customers that are looking for loans. And if their businesses are showing a loss, to the point that their debt to income ratio is below 1.25 then we will not lend to them. So after our first loan, until we pay off the loan and maybe even after they will not loan to me again because I will be using the tax law to not pay taxes, both for my business and maybe a little personally if possible. 

I have heard both good and bad things from Hard Money lending. I am just at a loss as to how to answer this. I have no problem working a deal where I get no monetary return, put in my sweat equity. But I was under the impression that with sweat equity you get the equity to then LOC credit and thus the rolling begins. Can anyone answer me this riddle.

Thanks in advance.