Help---PML wants 80%-20% split!!!

[Steven Blanton]

Hi,

I am a new investor and actively looking for deals. I have researched some of the HML's and didnt' really like to percentage of "skin in the game" that is required upfront. So, I decided to go the PML route.

I approached a close relative as a PML. He is single and makes well over $300K/yr, lives like he makes $30K/yr, and has a pile of cash in the bank. He doesn't invest in REI, stocks, bonds, etc. Just keeps his money in the bank. I initially approached him and sold him on the idea of loaning me the purchase price plus rehab costs at 10% interest for 6 months with no money down. During this time I would rehab and sell the house OR get a convential loan based on ARV and cash him out. He was very open to that idea and I was super excited.

However, he called me back within an hour and said that it's not fair that I would end up making more money on any deal that I used his funds for.  So, he now says the only way he will do business with me is if he gets 80% of profits on the 1st deal, 70% on the 2nd, 60% on the 3rd, 55% on 4th, and 50/50 on the 5th deal from then on.  

I tried to explain that that is not typically how PML's or partnerships work in REI. I reminded him he isn't making anything now and what is wrong with making 10% on his money and that I am doing all the leg work marketing, negotiating, rehabbing, project managing, and selling. Worst case it doesn't sell in 6 months and get his money back plus 10% when I cash him out with a refi. He doesn't seem to care since he knows he has the upper hand and requiring no skin in the game.

I am pretty PO'd to say the least.  Is there anything I can come back with to get the negotiations more in my favor.  I mean I don't want to but my hump for 3-4 months on a rehab and sell it for a $40K profit just to see $8K go into my pocket while $32K goes into his just for loaning the money that is backed by a secure investment.  Any thoughts please???  Thank you!!