Best way to bring a friend as investor on an upcoming deal?

[Felix Stone]

Hi - Me and my partner(Tom) have been investing together for some time. We started a new ABC LLC with a common friend(John) and got a deal under contract due on financing(75% LTV). Come to find out lenders had a problem with John because he is putting in 60%($100,000) of the initial investment, no landlord experience and he is not a US citizen even though he lives here on E2 visa and has been investing through his US based XYZ LLC.

So Tom and I re did the ABC LLC with just us as the members of the LLC and lenders were fine with that. We are closing in a few weeks.

Question - How do we contract with John now for the initial investment? 

1 Can't bring John on as a member of the ABC LLC since lenders will have a problem with that when they find out. Can our ABC LLC do a limited partnership with XYZ LLC without raising flags with the lender?

2 We can do an interest only promissory note like (John get x% on the capital) but John had agreed to 54% equity in the original deal and all 3 of us would like to do a promissory note with profit and loss sharing, where John gets amount equivalent of 54% of total cash flow calculated end of each year + 54% of the mortgage principal pay down at the end of the term(lets say 3 years)

eg - if the cash flow is $10,000 every year(for simplicity), John gets $5,400 every year. And at the end of the term, lets say total principal paid towards the mortgage is $20,000, then John gets $10,800 once. 

So John's total return is $5,400 X 3  +  $10,800 = $27,000  (roughly >9% because cash flow will ideally increase every year)

Is there a way to structure the deal like that through a promissory note?

3 Is there any other option?

[Greg Scott]

Felix:

In my experience, for a commercial loan, typically the banks want to know a lot about anybody with 25% or more of the equity.  It's not clear from your post but I presume he may also have had the majority voting.  The bank is certainly not going to want a foreigner, newbie, to have control over the asset that is security for their loan.

With that in mind, I would presume that any structure where John is not on title and John does not have a vote in the ownership LLC you would be OK with the bank. But, if I were John, not having equity or control of some other sort might make me walk away from the deal. Your best bet is to first have a conversation with your contact at the bank to understand their concerns and discuss ways to put the deal together that avoids their concerns.