How to structure the private money deal

[Naeem Kapasi]

So I am looking for my next flip in Houston (wholesalers, let me know if you have anything!)

The reason I am writing this post is that I have two friends who want to lend me some money for the flip (I will put in some money of my own as well). In return, the three of us will share the profits equally between us. I have two questions related to this:

1. I want to set up a contract between us, that states that they are lending me money, and we will share the profit etc etc. Basically the terms of the loan. This is to protect ourselves, from each other, in case something goes wrong.

2. Who will own the house while it is being remodeled? Me alone, or the three of us?

If you have any other advice, please feel free to share them with me!

Thank you in advance!

[Ryan Saulle]

Hey Naeem, I'm not a CPA or attorney and you should run it by both to see what they suggest, but how I structure my deals:

1.I have an entity set up (S-corp as well as an LLC) and you can draw up promissory notes with them stating they are lending you $XXX on date XXX and you have to pay them back by date XXX with an interest of XXX%. Doing this you can also secure the promissory note with the property/Deed of trust(if you don't pay them back, they can take the property).

You can put in there a no pre-payment penalty as well. So if you owe them that money with interest a year later and you flip the house in 6 months, there is no penalty.

Another way is they can both get their own attorney's and have them write up contracts and give it to your attorney and everyone signs that way.

2. You can also set up an entity with multiple owners 33% each. I have never flipped a property outside of an entity so I don't know the process but I'm sure you can buy it in all 3 of your names as well.

Either way i would ask a CPA / Attorney in your area. Hope this helps!

Ryan