Suggest percentage or fee to invest for silent partner

[Rick Ramirez]

I have a silent partner who recently acquired life insurance money and wants to invest in real estate. However she does not know anything about the business and would prefer to be completely hands-off. 

In contrast I've been doing this for 2 years and have my own LLC. I find the deals myself, analyze them, and either wholesale or flip. During the past two years I've built up my Professional Network which allows me to do all this for a nice profit. I have not lost money yet.

Her capacity will be to either provide Gap funding or secure the hard money loan using her capital. The Gap funding is provided to other investors when I wholesale the property to them and know the hard money lender. This pretty this reassures her that she will make money. She will not lose any money. Worst case scenario we have a lien against the property.

My question is this. She doesn't understand the value that I bring to the table because the only way she looks at it is that she is risking her hundreds of thousands of dollars,  Not me. We will not be forming a joint partnership company. So I am currently offering her a percentage of either the interest she makes or the profit on our own flips. How would you structure the fees for this? What is acceptable and what is not? At the end of the tax year I will be issuing her a 1099 for her profits.

[Sue Hough]

Rick,

I have utilized “Gap” funding an other creative financing options in the past.  I have usually negotiated a fair compensation with the interim lender ranging from 2% for a same day close to 4-5% for 10-20 days.  Any term longer would go to a monthly rate.  In the Chicago area the rate is about 1-1.5%.

More importantly, I believe, you may want to examine your motives for entering into any business or personal relationship where the other party does not value you?  I can almost guarantee the “silent” partner will not change and the future will become a constant struggle on your part in a futile attempt to constantly prove yourself to this person.  I am confident you would be able to secure a different lender to provide you these financial services without the personal struggle.

Good Luck,

Sue Hough