What is a good return for an investor to make on a deal?

[Hannah Lewis]

Hello everyone,

I've found an investor who is interested in investing with me. I'd like to BRRRR, or find a turnkey rental. I don't have a total of 25% saved yet for a down payment, however I have the experience (being a property manager) and the ability to qualify for the loan, in addition to covering the other costs and fees associated with the loan.

The plan is this;

For the investor: (would like to be minimally involved, more so to be a hands off/silent investor) will contribute to the down payment needed to purchase the property with a conventional loan up to 25% of the LA

Me: I will find the property, fix up if needed, rent out the property and manage it. (I've already have a vetted team to do all the rehab and turnkey work)

I initially was offering 10%-12% return on what is provided from the silent investor. Looking a little bit like this;

EXAMPLE:

Est Sales Price: 150,000 (Loan in my name)

20% down payment: $30,000 (money from silent investor)

10% deal: $3,000 profit at the end of 6 months either broken down in monthly installments: $500 monthly pay out to silent investor for the 6 months or paid in full at end of 6 month term.

They'd get their full investment paid back in 6 months plus the 10% earned either monthly or in full at the end of 6 months.

My questions are as follows;

Is this a good RTI for an investor? 

If not would 12% be a better option? (This is someone I know, I'm not looking to short change this person on the deal, I'd like to provide an industry standard rate of return)

What type of contractual documents should I have drawn up for this? (This is someone who knows what I can do and trusts me to do what I say I'm going to do, however I want to be professional in every aspect)

Should I seek an attorney to draw one up for this agreement?

Is there anything that I should be considering with this scenario?

Thank you all for your time and insight on this, I truly appreciate your time in doing so!

[Craig Anderson]

From my understanding with Private money loans from the people that I've reached out to, the typical rate is 9%-12%. I would offer what you are offering especially to someone you know. Where else will you get 10% back on invested/saved money along with all money invested back in 6-9 months?  I would prefer to pay everything back in the end, but everyone has their own philosophy.  I would always have a contract written even it's from an online source. It protects you and the investor.