Lending Money to Brother-in-Law

[David Lowe]

My brother-in-law is a contractor with plenty of experience and I believe he does good work. He has seen my success over the years with buy-and-hold properties and is interested in getting into flipping. He is looking for investors among his friends and family and has asked if I'm interested. He has a house locked up that is well below market value and will be doing the work himself (along with his subs). He has 4 investors already and is looking for a few more, with people investing between $25-100k. I am considering investing $25,000 as well. It sounds like this would be considered a personal loan, secured against the house. He is offering a 5% return on a $25,000 investment, and anticipates needing the money for 4 months. Is this a good deal? Are there any clauses I should make sure to include before signing anything with him? I am considering investing with him because I am having a hard time finding SFRs in Charleston at the moment and don't like having investment cash sitting in a savings account. His wife has a good job, so I am confident in his ability to pay the money back even if something bad happens to the house. He is trustworthy and does good work. I have never been on this end of a loan before, so any advice or tips would be much appreciated!