What kind of return is typically promised to investors of rental properties?

[Christopher Albritton]

Say I've a quad that I have no money to put into, but I have an investor who does have the cash. What is a typical arrangement between the investor and I? Once I buy the property we split half of the monthly income, and then us splitting profits once the property is sold? Is this just one way of doing it?

[Daniel Dietz]

You will get many different opinions on this one :)

I only have one duplex right now, bought in a partnership with two other SDIRAs. So it is an 'all cash' purchase since it did not qualify for most Non-Recourse Loans.

I/We are looking at more rentals. We are considering both going the non-recourse loan route and making sure the next property(s) would qualify, and also looking at a couple of 'owner financing options. In the second scenario, we would just be paying a fixed interest rate to the owner for a set number of years. Part of how we could make that work is our reputation in business dealing in the smallish town we live in.

So I guess my question is; why not just borrow the funds from your potential partner? This would put (theoretically) all of the 'profit' into your pocket, and still give them a decent return too.

I think Patrick hit it on the head otherwise in general with 'why would the investor not want almost all the income if he is taking ALL the risk'? I have looked at partnering like you are talking, and if you can find the lending in your situation, it is almost always financially better for you to borrow and keep the profits.

Good Luck, DKC