Structuring a deal with a private investor

[Chance Thurman]

Hello all!  Hopefully I’m posting this in the correct location.  

I have a fixer upper that we are acquiring.  My plan is to use two sources of financing on this deal.  One source being a hard money lender and the other source being a private investor.  The private investor will be putting approximately 80K into the deal with the remainder coming from hard money.   The Private investor is also the realtor and will not have anything operational to do with the project but will be listing the project for sale at 6% once it is ready.    The project will take approximately 3 months for the upgrades to be completed then however long it takes to sale.  We are hoping for a total profit of around 110k after all expense.  Now for the questions.

1. What would be a fair return for the investor?

2.  What would be the best way to structure their return?  A larger split on the profit or paying them interest during the deal with a smaller split on the profit?

3. Once we decide on the details, how do I go about documenting everything? I'm planning on purchasing the property in an LLC I already have. Will I need to go to an attorney to have them draw up papers that outline the agreed upon loan terms? Then she just brings her cash to closing?

Let me know if there is any information needed to give a detailed answer.

Thanks in advance for your response!

[Dan Gamache]

With that kind of profit I would try and get private investor to go for interest on money loaned vs split of profit. Even if it's a high interest rate and points, you hopefully only own for 6-9 months, try to get accrued interest so you don't have to make monthly payments. Also, you don't have to worry about forming a partnership. yes, go to an attorney and they can draft all loan paperwork.