Refinancing vs using a partner's cash

[Jeff DiMarco]

My business partner and I bought 6 section 8 houses with my cash last September to start our real estate investment journey. I'm a remote cash source/investor while he is the boots on the ground. 

When one of the tenant's moved out, we decided to remodel that house in order to rent it out as a single family rental since the house was a mess and we thought we could get more rent. The house is a 3 bed 2 bath that we paid $122k cash to purchase and then my partner did the remodel with a friend for about ~$15k all-in, but my he has not taken any payment himself yet. We signed a 1 year lease with a new tenant for $1600/mo, so this is looking like a good deal/investment currently! Our business account is almost empty and we want to remodel 2 more of our houses over the next couple of months to repeat this process hopefully. We estimate that we'll need about $40k to pay for the next 2 remodels, and my partner could use a payday of ~$15k or so for his labor on the first remodel. The question we have now is whether we should refinance to fund these goals versus having me lend more to the business.

Initially, we were thinking that we could refinance this first remodel with an ARV of ~$180k-$210k in order to take out $140k+ and easily pay for operating expenses going forward and give my partner his first payday. On second thought, however, this is just adding more debt at a %8.25+ interest rate and I'm wondering if I should be the bank instead. I have a little more cash and I am not in a rush to get paid back. Instead, I was thinking that I can inject another ~$55k (more if needed) or so to pay for everything the business needs and charge my own business 8%ish. I would prefer that 8% interest go to me instead of the bank! I'm fine with either charging just interest or also paying down principal. My main goal is to get a return on my capital wherever it ends up.

The real estate playbook says to BRRR, but are we in a position where we should keep the bank our of the equation until I run out of capital that I'm willing to invest in the business?

I should note that this extra cash I have on hand is sitting in Treasury bills, so 8% is a little more attractive to me than the 5% (I know it's riskier!).