Structure for JV partnership to pay least taxes

[John Karl]

Hello, 

I conducted an extensive search but could not find the best answer on structuring a private money loan for a fix and flip property, that minimizes the taxes for the Private money lender. Essentially one investor will put up the purchase and rehab costs, with the other doing all the work, equally a 50/50 split profit. For the private money lender what is the best way to structure the deal to pay the least taxes?

1. Set up a JV LLC with the investor lending the money to the company, then the LLC (taxed as S corp) pays the lending member back the loan as an expense, then splits the profits via salary/dispersment? This would entail the private lender pay a portion of self employment tax correct?

2. Have the lender loan the money to a LLC owner by the working partner, then the LLC will issue a 1099-int? This would be taxed as ordinary income. If a set interest amount was not established, how would the verbiage or documents need to be written to account for a equity share after the sale of the profit?

Not sure, just looking for the best set-up to pay the least taxes for the member funding the project since it is essentially a loan, but with a equity return instead of a set interest rate. 

Thanks