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Updated almost 4 years ago,
How to bring in a partner on a deal?
My aunt is interested in coming alongside us as a capital investor on a deal. We’ll be paying cash for a trashed triplex, gutting & rehabbing it, putting renters in two units, and letting our 19 year old son buy it in a year as his first house hack to live in third unit.
How do I handle my aunt’s role? Go to a real estate attorney and draw up a contract? Are there templates in BP somewhere that would be appropriate for this kind of transaction? She is going to fund the purchase + rehab. We want to return her money with interest in a year after Michael buys the property from us, and we’ll use the remaining money as seed capital for the next deal. Michael will collect the cash flow from two tenants, pay down his mortgage, and continue working & taking online classes while basically living there for free. He’s a solid, hardworking young man, so I think this will be a great opportunity for him. (If he changes his mind, we’ll just refi and hold it.)
Any advice for any part of this scenario? We’ve done a live-in flip with our own cash before, but we’ve never brought in a private investor and want to cover our bases and keep her safe and confident.
Any advice about the terms for our arrangement and what percentage would be appropriate to offer her? We haven’t discussed those particulars, but she has plenty of capital as well as confidence in us with this investment.