Money Partner: How to structure

[Ben Reiss]

I have one new construction duplex rented out to students which is nicely profitable. I am looking at another one that will be slightly larger and slightly nicer. resulting in a bit higher rent. I don't have enough money for the down payment right now. I should be there in about another 18-24 months.

I have a friend who is interested in earning more on his money than the miniscule returns from the bank. He cannot get a bank loan since he has no real income. Does have a very nice nest egg from a divorce where he was a stay at home dad. How could I structure things so they were fair to him and also allowed us to move forward. I think the bank might question where I got the 100K.

He does not want to be involved. He just wants to lend the money and get his return (while covering his ***). Could we set it up as a partnership with specific buyout time frame. Say set it up so we partner together and he is given a buyout from this cashflow and other units I have.

I could theoretically give him an easy 2.5K a month till paid off, without touching any cashflow from the new unit. Figure borrowing for 3 years amortization on 10% gives a payment of $3,227. If I made it an easier cushion I could make it 5 years which he is ok with for a payment of $2,125. Assume I am not crazy in assuming this debt and is there a way to structure this.
I have good credit and a great DTI once the rental is counted. I also have 2 jobs and make very good cash bar tending in the summers.
Other option was to give him a second on my current duplex. Owe $310K worth about $425K (no room to pull cash.) and on the new one. Do 15 year amort with a 5 year or 7 year balloon.
I am looking for any ideas on how to structure the deal so it's fair to both parties. both parties are covered and everything is spelled out.

Thanks Ben