Mutually beneficial private money loan

[Jeremy Taylor]

I have a few friends and associates that I know are interested in investing. I want to approach them about possibly investing with me on some deals. Mostly brrrrrr deals but possibly larger appt. deals or flips. I’m just not sure what to tell them. I want to make sure it’s a proposal that is beneficial for both of us and that they do well enough to want to continue to invest, however I want to profit as well. I know a lot depends on the profit available in a deal, but what are some typical numbers you use?

[Account Closed]

It depends on how you structure it.  If they are investing with you, you could form a partnership for each deal, where you serve as general partner and control day-to-day operations while your limited partners (investors) provide the capital.  One possible structure would be for the LPs to receive a preferred return, and then any residual profits would be split between the GP (you) and the LPs.  Of course, you can also invest on the LP side of things as well.  As a starting point, you might start with an 8-10% pref and then a profit split in the neighborhood of 60/40.  As Rodney aludes, there are rules to this kind of thing, especially if you raise money from non-accredited investors.

Another option is for them to come in as your lender and just pay them a set percentage on the loan.