Multiple private investors - Unsecured or secured?

[Nicholas Morgan]

Hello everyone! 

I'm currently raising private capital to have available so I can purchase a fixer-upper property this year and to follow the BRRRR strategy. As I'm talking to potential investors, they often ask how I'll structure the deal and the question almost always comes up about the ability to foreclose on me if necessary. My plan has been to give 12% annual ROI and have unsecured loans from the investors.

However, I do want to investigate the possibility of making it a secured loan. Let's say I purchase a property for $100k and the capital comes from 4 investors at $25k a piece. How would I structure it all so that I can still do a cash-out refinance but allow the investors to foreclose if something goes awry (it won't, but I hope this helps potential investors feel more comfortable with investing with me). 

Should I buy the property with an LLC where each of the investors are members and have it written such that if time expires and they want to foreclose that the property is to be sold and the returns are split amongst the LLC shareholders based on % invested in the deal?

This seems like a hassle, but thought I'd understand the option. If it allows me to do a BRRRR deal sooner, then the extra headache would be worth it. I do like unsecured much better though.

Thanks!