Residential Landlord · Saint Louis, MO · Member since 2013 · 26 posts · 0 votes
Question: I have a very wealthy acquaintance who has let me know that he is willing to partner with me on Realestate Investing. We are looking at B&H to rent. Unless we get the deal that we can flip and make a good margin. He doesn't want much to do with it except make some money at a good IR. How would I go about handling a deal like this. What's a good percent to offer return? How does he get his return if we are renting and expect $100/door? Do we split that income?
Please advise.
-Thanks
Investor · San Francisco, CA · Member since 2013 · 147 posts · 97 votes
13y
Hi John,
The are endless ways to structure this type of partnership. Here's what I did with my father and best friend who gave me their money to invest.
I assume that you don't bring any money to the table and all the money that you invest is theirs. In order to make the deal work you have to buy property with strong cash flow and preferably with equity to lower the risk.
You can do 50/50 split of the cash flow and of the profit of future sale of the property. This is what I did with my dad. With my friend I did 75/25 of the cash flow and 60/40 of future sell of the property. The money partner gets the higher return. Obviously, you can switch this around but obviously they will feel better if they get higher return and will feel more comfortable to do the deal.
You can also do a deed of trust to make sure it's a secure investment for your private lenders if things go sideways.
The key again is that the return on their investment will be higher than what their make in the bank (which is not hard to do these days).
AND you need to know what you are doing and give them the confidence that they will make money with you.