Turning partners note into a long term one

[Brett Wagner]

Hi.  I have a question about working with a partner to change the terms of a note. Here’s the details:

Purchased a SFH with partners money, $50,000 purchase price, $30,000 rehab money for a total of $80,000. The terms of the note are 6 months at 10% interest which means at 6 months I'll be paying him back $84,000. The idea is to refinance the property after the rehab in order to pay him back. But I got to thinking… what if I asked him to turn the note into a long term note, maybe 5-10 years at a slightly lower interest rate, amortized over 30 with a balloon at the end. Can you help me think through how to pitch this? What are the upsides for him and what could I do to make it worthwhile for him? Thanks

In case you’re wondering, the after-repair value will be somewhere in the $175k-$200k range and may possibly be either a live-in then flip or a long-term rental.