Friend wants to give us money to invest in properties

[Kelly Conrad]

We have a friend who is working over seas, and because of this, he cannot put his foreign money into a Roth account. We have been talking about getting other investors to help fund another multifamily, and when our friend offered, we were very excited about the opportunity.

Now, I want to be fair to our friend and make it worth his money and time. My searching hasn't really had a lot of good info on deal structures that have worked for others when using OPM.

We currently have a buy and hold property that cashflows well (~650-700). Since our friend is out of the country, we would be assuming the debt and have the title in our name for the future property. Our friend would just be providing the cash. I'm thinking 6 or 7% would be a good return for him, as that seems to be pretty good in terms of getting a loan.

I'm thinking we'd use his money towards a downpayment (we're not sure how much he has currently, we'll be finding out in a few days. This is all assuming he has a good bit of cash, which it sounds like he does since he has no expenses) and then we'd send him a check monthly until we sell the house and then give him his original loan back. So we would be taking the home equity. It seems like that is a more common way to do these kinds of deals, but is it the best way? I want it to be a win for both of us, and hopefully if it goes well, others would want in later.

I'm very open to ideas and what you have all done to make this work before. I'm also not completely tied to a buy and hold structure if it would make more sense to flip a house with someone else's money to get a better ROI. Thanks for reading!