Private Money Lending Structure

[Account Closed]

Hi everyone!

I'm new to the RE world and just became a RE Agent as well.  I want to start fixing and flipping with a family/friend who will be the financial backer.  

What is the best way to structure a deal with them if they will be fronting all of the money and I'll simply be the project manager/RE Agent on the deal? 

So as the RE Agent on the buy and sell I'll technically be making money on both the buy and sell of the property ... won't be much but it will be something.  And the family/Friend will be putting up all the money for purchase and construction costs.

Is there any specific way to structure a deal like this?  If we end up selling the house for a profit, would be split those profits 50/50?  It just seems like the person putting up all the money should make out better on the deal.

Any help would be much appreciated!

Thanks

[Brandon Hotopp]

Up to you . If you wanted to split it 50/50 you can write it up like that . Or if you want to borrow the money for 12%APY you can do that to . It's however you want to structure it . Just make sure to write a business agreement up and keep it legal . Money ruins relationships faster than anything else.

[George Krajacic]

When I lend money to flippers I insist for them to have a skin in the game. That usually means about 20% down payment. In my opinion, you should not be making money upfront by taking commission for purchasing the property. If you do take a sale commission it should not be more than 1% for listing side. With that structure 50/50 split would be fair. Again, this is my opinion! And remember most important is for you not to take undue risk with yours family’s money. It would be good for you to attend investment clubs in your area and talk to people with the same interest.

Good luck,

George

[Robert Newburn]

Although I admire your ambition, I guess I first think about myself and what I would do. I have been a landlord for quite a while now and have managed repairs and small rehabs in my properties. I do not think that has given me the skill set to flip houses. Contrary to what you have read or have been told, it is a skill set and not everyone can do it profitably, much less with no experience. I agree with the previous poster, I would attend some Investor meetings in your area.