Private investor question

[Jay Rogers]

My partners and I are finishing our first flip, which we funded through a private lender for the down payment and then used one partners credit line for the rehab. We’re already looking to the next deal, and want to grow our business to flip multiple properties at a time.

Another investor offered us 30k as an “investment in the business”, rather than on a specific deal. We can use the 30k indefinitely on future deals, and he wants 25% of the profits. 

While the idea of not having to renegotiate on every deal is nice, I feel like the price is pretty steep. If our future project are similar to this one, he’d make his money back in 4-5 flips, and we could conceivably grow this business to a point where 25% of profits becomes a very large number year over year.

I don’t really know what’s fair here, looking for any advice at all. Maybe we ask for more money or for him to take a smaller %. Or maybe we put in the contract that we can opt to repay his 30k at any point to end the deal. I’d love to hear what you guys think.

[Jason D.]

@Jay Rogers no way would I give 25% of profits, indefinitely, for $30k. If you become even moderately successful at this, In a year or 2 that $30k will seem like such a small amount of money, you'll be kicking yourself for taking it. If it means going a little slower at first, go slower. With decent credit you can get a $30k line of credit, take out a HELOC if you have a house with equity, etc....