Money From Family And Friends

[William B.]

Over the past few months, usually after I posted before/after photos of recent flips, I've gotten calls and texts from family and friends asking if I had any projects coming up that they can invest in. My usual answer is something along the lines of "if something pops up, I'll let you know" since I wasn't really open to investing with people close to me before now. Everyone who has shown interest completely trusts me and wants to basically “hand” me their money and get it back with interest after I sell. Once this COVID-19 thing passes, whenever that may be, I’m sure my business would be able to scale more quickly and recover from lost income with an influx of cash from family and friends.

(I'd never take money without some sort of written agreement attached to it, so I planned to draw up promissory notes)

I need some suggestions:

•  Has anyone had a contract drawn up for friends and family who have invested in their business? If so, how was it structured? What are your thoughts about just using a promissory note? I’m willing to have an attorney draw something up for continued use if necessary.
• What should I send the people interested in investing with me? I want to email some sort of packet that will explain my strategy for flips and a case study on my last property. I think Brandon said BP has a report that is generated after using one of the calculators that he sends off to investors. I haven’t been able to actually see one yet.
• What terms did you offer? Since this is my first time being open to accepting funding from others, I’m not 100% sure what the best deal structure is. I’m wanting to offer a flat 12-15% return on investment within six months (ex. they give me $20k and get $22,400-$23,000 back within 6 months).
• Did you reach out to investors only once you had a project under contract, or did you stockpile cash to have on hand so you could jump on deals when they popped up?

Any thoughts on this would be helpful. I’m using my self-quarantine time to work on a packet to send out to everyone after all of this is over.

Thank you!