Private Money Partner Scenarios in a BRRRR deal - Advice Needed

[Brandon Russell]

Hello All,

I'm just starting out on my real estate journey and I'm starting to gather information to structure my first deal. Right now I'm interested in doing a multi-tenant BRRRR deal. In the scenario I'm working I'm trying to use other people's money for the downpayment. I have a partner who is interested in contributing but I'm trying to figure out how to structure the deal to make it lucrative for them. My thought is that I would work with a hard money lender who in turn is going to ask for 20% down. This partner would bring the 20% to the table. In exchange, i'd pay them interest on their payment (12% sounds like it's pretty standard). But here is where I begin to get confused. I'm figuring i'd offer them 12% which would be amortized over a year and I'd pay them when once refinance occurs (am I doing this right?). So, if the project took me 4 months to complete i'd pay them at that 12% for 4 months.

Essentially I'm looking for them to be a passive investor without doing much and just bank on that. However, in my head that does not seem like it's lucrative enough for them. Perhaps I could offer them a percentage of equity in the home after refinance. How is that generally structured when people do that? Are there any other scenarios that may work to help make it more lucrative for them. Not sure if someone could help me out with a math example here of how this would work. 

Lastly, I'm open to this person being more involved but in exchange for perhaps more money or some of their time, i'd be willing to offer more incentives. 

I'm curious how some of you guys handle this with partners. 

Thanks!

P.S. One more thing. Brandon Turner talks about not operating with an LLC in these scenarios as then you can't buy a property with a conventional loan or you'll get higher interest rates. How do I protect my partner's interest while not operating under the protection of an LLC?