Meeting with Private Lender - Advice Needed!

[Phil Petite]

Hello BP!

I have a meeting tomorrow with a close friend of mine, who has deep pockets, and I'd like to run the idea by him of investing together. I'd love to do some rental deals with him, but I'm unsure of how to structure deals that we do. I'm not sure if I should let my friend put all of cash in for deals, and then I would take a management fee (either yearly or monthly), or if it is better to take an upfront fee.

Any advice would be greatly, greatly appreciated!! Thank you!!

[Doug Smith]

Great question and I think there's more than one answer here. My wife has a degree in design and has a ton of experience in flipping and ground-up investor construction. She worked for us for a while, but then broke off and started partnering. She also has a real estate license and has found that she likes simply managing the project and gettig the real estate commissions on the front and back in even more than she likes being on the LLC. That leaves more control of the LLC to the equity investor and provides them with a stronger return while my wife gets the real estate commissions...which when you break it down she's pretty happy with. Will you be using leverage (borrowing) on the deals or will your friend be pumping in enough to cover the purchase price, rehab, and costs? That will make a big difference. A cash buy will create a lower profit percentage, but it will provide more dollar-and-cent profit and reduce the time-value of money issues you would run into if it takes longer to sell. There are definitely many ways to skin the cat. You just have to find the one that seems right for you and your friend. I am sure you'll find even more ideas from others on here.