Partnering By Paying in Full and Giving a Private Mortgage on 50%

[David F]

I'm a Canadian that has been interested in putting some of my money to work in the US real estate market. I've been talking to a few contacts of mine that have had success with different strategies.

One of the people I spoke to has been investing in rental properties in Arizona and managing them on his own, from a distance. He's up to 10 properties and said that now he's been getting people to invest with him.

It sounds like an interesting proposition but I'm a novice when it comes to the types of partnership/equity arrangements so I wanted to run his proposition by the community here.

Basically, I would be dishing out 100% of the purchase price for the property while he would take a 50% private mortgage from me at 6% amortized over 25 years. We'd both be on the title and moving forward all costs and profits are split 50-50. At the time of an eventual sale, I would get back my 50% that I put in the house plus the balance of what he owes on the loan and then we split the profits.

He would be in charge of finding the property, finding the tenant, managing the property. I would also consider value in the the experience to do this once with him with the understanding that I could be involved in what he does so I can learn and then eventually invest more independently.

I tried searching to see if this was an arrangement that is common but I couldn't find anything like this. Do these numbers make sense? Another issue I see is that by paying cash I am severely limiting my ability to scale this out but aside from that is this proposition worth considering?

David