I have private investors (friends) wanting in. How do I incentivize them

[Ricardo G.]

Basically, they have seen me work really hard to come up with money for my own deals, when I first began doing flipping, I would ask them to join in and we would share the profits, because I needed lots of money, but they weren't too interested. Now, that I have enough money to do only smaller deals in rough areas by myself, they have come up to me wanting a slice of the cake.

My question is... How big a slice would be fair enough, in exchange for their funding of let's say 50% of an investment property?

I just want to set up a structure with a certain percentage depending on how much funding I get from them.Thanks everyone I really appreciate you guy's help..

[Leon D.]

If they already want in, there's no need to incentivize them, right?

The basic flipping/rehab math is this: cost of house + cost of improvements + profit margin = sales price. Some people will argue this or that, but basically, that's it. You know the cost if the house, and you probably know for what you could sell it for post-rehab, so the difference between the two is the materials and labor to fix it up, and also profit margin.

Since it sounds like your friends only want to fund, and not put any sweat into the deals, I would consider a flat rate for them, so to speak, like 25% of the profit (and you keep 75%). An arrangement likes this also means you're protected a bit if the project doesn't go as well as expected, since if you make less, they do to, and you're not beholden to a certain fixed interest rate or percentage of ARV or whatever. You'll have to get your own number depending on your circumstances, but the basic idea is to make sure YOU get most of the profit, since you're doing ALL of the work.