JV Partnership or Promissory/DOT in Texas?

[Bianca Navalta]

Hi all, 

We have a close family friend who wants to invest in our first flip with us, and we are trying to figure out which type of contract to present him with - a JV contract or a promissory note with a deed of trust. We would flip just one house and then go from there.

He would loan us the cash for the purchase and rehab, and we would find the house, manage the flip, sell the house, and then split the profit 50/50. So now we have to decide which contract would best fit the situation.

I spoke with a couple of attorneys who recommend a JV partnership to help protect him and split the profits 50/50, and they encouraged him to start an LLC, but I don't want to make him do extra work if he doesn't have to. I am confused because I have heard many podcasts where the investor writes up a promissory note with a deed of trust and they split the profits 50/50 with their investor... has anyone in Texas done this and have any advice to give?

The gray area for me with doing a PN and DOT is when it comes to dispursing the money at or after closing and when it is time to file taxes because I spoke with a title company and they said at closing they wouldn't be able to give 50% of the profits to him and 50% to us as it could be seen as usery if we did a PN. So at closing, would we just get a check for the full profit then split it 50/50 with him on our own time? And when it comes to taxes would we only claim the 50% we profited, or do we pay taxes on the full profit amount?

If we go the JV route, it would be our LLC and him as an individual so who would pay taxes in that scenario?

Sorry for so many questions I want to make sure I fully understand the process before discussing the contract with him.

Thank you!