Flipping: best entity to purchase & tax and financing questions

[Len Antonelli]

I'm a full time realtor who has helped investors find and sell dozens of homes. I have a background in General Contracting and I've extended my contractors to my investors who have been doing their jobs at contractor pricing. I now have an opportunity to flip on my own. Thanks in advance for any answers and I'm happy to return the favor if anyone needs any advice from a real estate agent!

I have someone looking to be a partner on the financial end, basically just lending the money, while I handle everything else. She owns a vacation home outright and said she would be willing to borrow the equity to fund the flips but wants to know how we will be structuring everything, and what her tax implications will be. We basically just don't want to dive into it without all ducks in a row and we can't make any moves until we have this part figured out.   

Question 1) 

Knowing the money is in the property with 100% equity, what are our best loan options for using the equity to fund the flips from start to finish? *this is not a lender request, just trying to get ideas,...example HELOC vs XX?

Question 2) 

As far as the entity is concerned, I was wondering what suggestions anyone has regarding structuring and whats a fair split of the profits. Anyone have examples of what they are doing in a similar situation that has been working out well. 

Some scenario's I was kicking around....

Scenario 1) Since she is just putting up the money, would we both benefit in any way just putting her on as a mortgagee or note holder, and how would she be taxed on the profits/interest that I pay her if we go this route? (keep in mind, most likely the money will be from a loan, so we'll be paying some interest on the other end too).....

Scenario 2) We could purchase with an LLC partnership, not sure of tax implications but an accountant I know says the partnership itself is not taxed, profit goes into a K-1 and each of our profit shares would go to our personal returns using the K-1...

Again, any examples of whats working for you in a similar situation (one partner putting up the money and the other handling the day to day tasks) would be huge even if you dont have answers to the loan and tax Q'S.   

Thanks again in advance!!!!

[Wayne Brooks]

Her income from a straight up loan/mtg would be just be taxed as ordinary income.

Her income as profits from a flip as a partner would be taxed as ordinary income Plus likely self employment tax (15.3%).

Of course, she needs to talk to Her cpa.