Potential private loan - is it worth it?

[Lisa Shows]

My 5 siblings and I have inherited my late father's primary residence.  We are considering keeping it as a rental property and splitting the revenue.  However, my brother has proposed another option: that we sell and after realtor's fees I take the money and use it as a private RE loan, with an agreed upon interest rate.  This amount would probably be around $180,000. He is proposing a percentage rate around 8%.  I know this is slightly higher than current investment mortgage rates, but I am wondering more about the long term - would it be worth it to have a higher ongoing interest rate for a pot of money that gives me flexibility?  The idea would be I would pay them over the long term, not just refinance and pay off the loan. 

I am thinking of scenarios such as buying one property outright with cash then refinancing in order to continue the process with as many properties I can get (eventually likely just using it for a down payment). I used hard money for my first rental property and I think this method would simplify the process. I know part of this calculation depends on the numbers of a particular deal I might find.  

I would love to get some perspectives from other investors as I don't have any other investors I know in person to discuss this with. 

Thanks!

[Jeff Copeland]

Here's one idea: You could structure this like a hard money line of credit. 

The money sits in a money market account collecting measly interest from the bank if it's not being used (so it doesn't cost you anything if its not being used). 

But you can withdraw up to the full amount at a predetermined interest rate if and when you need the funds for a specific investment property. 

I would actually try to structure it in such a way that you can refinance and pay off the line so that it resets and can be used again and again. Something like an origination fee or points every time you access it could sweeten the deal for your siblings, and the balance would grow considerably over time. 

For example:

You draw $100k from the line for up to one year with 3 points at 7% interest only. In this scenario:

$3000 in points get paid into the account. 

$583/mo in interest gets paid into the account. 

After 9 months, you refinance and payoff the principal. 

Now the available balance is $188,247, and you wash, rinse, repeat. This example is something like an 11% annualized rate of return, and you could secure the funds by giving them a first position mortgage, just like hard money. 

Did I just invent a new loan product?