How do they split the prophets?

[Gary Thompson]

Hello All, got a quick question for anyone out there. I have a client who is putting together a spec home, the market in Utah is very good, and new construction is in high demand.

This friend is getting a lot loan from his father-in-law in the amount of $70 in cash (total for the lot) Then he is getting a new construction loan in the amount of $230,000. (all his risk) He is paying the builder (another brother) just like anyone pays a GC.

When it's all said and done, they think they can sell the home for a profit, but they are not sure how to split up the profits, should the ratio be based on the percentages for example 23% to the father-in-law, and then 77% to him? or just pay off the 70K at a certain interest rate? 

haha, I'm sure there is a better way - so just looking for some additional perspective - thanks!  Gary

[Jeffrey S. Breglio]

There are numerous ways to structure and protect each party. The father-in-law can be a lender and share in profits via a Shared Appreciation Note and Deed. His money is protected just like a lender, and he can share in profits instead of getting an interest rate. We do this all the time. What he gets is totally dependent on what is negotiated between the parties. But there are many ways to do this. You can give the office a call and we can go over what is best in your situation.

Happy Investing

Jeff