A loan from a relative

[Account Closed]

Hello everyone. I'm currently working on buy my first rental property. I have a relative with some disposable income. She is looking to invest, and said she'd be interested in funding some of my deals. I would need about $25,000 to 30,000 from her to close the deal. If I were to promise a return on her investment, how would I determine what's fair? Also what documents should I use to promise her that return on investment? 

[Chris Simmons]

That's what I do with my relative investor.  They loan me money at much higher rates than they can get with a CD, I file a mortgage for them to get them into first position.  They even fund me the repair money.  This lets me go in at below 50% ltv, invest another 10 - 30% ltv to bring the property up to 100% ltv while only investing 70-80% ltv.  Of course this depends on how well i did negotiating the purchase price and managing the rehab budget.  

Then after 6 months to 1 year, depending on how soon I need more money, I will do a cash out refi, pay them back and borrow again for another property.  This keeps it so I don't have to invest much, if any of my own money go get 20%+ in equity along with the cash flow since I buy and hold rentals. 

The only real difference is that I pay interest quarterly vs monthly.  But whatever you two agree to is fine.