How to buy and hold with family and friend's money?

[Tim Robinson]

Hello all,

I'm looking for advice from people who have purchased buy and hold properties using other people's money. I have a couple of family members that have money they are looking to invest in real estate and know that I have at least a very limited knowledge in this field. I am not looking to do flips necessarily which would make it pretty cut and dry as to how/when to pay people back with interest (once the property is rehabbed and sold), but more looking at buying and holding properties in my portfolio.

I guess I have two separate questions on two potential scenarios and would love any guidance form anyone who has been in this position before as I'm sure it's not a rare occurrence:

1.) If I have a family member that has a self directed IRA and is looking to invest that money through me in a real estate deal (buy and hold for me), how would I structure the deal so that they get their money back with interest? Should I give them a percentage of the cash flow for an indefinite amount of time? I feel like this is not a very attractive option for them. Should I give them a piece of the equity? Should I set a long time limit on returns and cash them out once I refinance down the road? I guess I am looking for that ideal balance on making this an attractive investment to my family and also making this a worthwhile buy and hold deal for me.

2.) In the case where I have friend's that are ALSO interested in buy and hold purchases and are looking to do it WITH me, what is the best way to structure that deal? Split costs and equity with all parties equally? Split monthly cashflow equally? I guess equal splits is the most sensible route, but how does this actually work logistically? Would love any guidance on how people have drawn up joint buy and hold contracts among partners.

Looking forward to any guidance anyone can provide. Thanks in advance!

Tim Robinson