Newbie over here!

[Andrea Davis-Tarantino]

My Dad and I are teaming up to start a fix flip journey together. I have a friend who is further along on the path (has done 5-6 of her own) who has offered to help as a consultant of sorts. I have also been introduced recently to a woman who is looking to be a financial partner. So hard money loan in my name, down payment and carrying costs covered by her but we still need to meet to hash out the details. Here's my question: What is a fair way for them to be compensated? Interest paid on their loan or a percentage of the profit? How is this typically handled? 

Thanks in advance for any insight!

[Jonathan Greene]

Welcome. It's great you are getting set up to start your investing journey, but I wouldn't recommend taking someone else's money on your first fix and flip. The first person as a mentor/consultant sounds great, but I would make sure you know what you are doing before you take on a financial partner. The reality is that they should not want to invest in your first flip because it's too risky if you have never done it.

[Savannah Holzer]

Hey Andrea, welcome! A fair way to compensate your financial partner typically depends on the agreement you structure. You could pay them a flat interest rate on the funds they contribute, similar to a private lender, or offer a percentage of the profits to align their success with yours. Many investors choose a profit-sharing model for true equity partners, often splitting profits 50/50 or based on the level of their contribution to the deal, but ensure everything is clearly defined in writing to avoid misunderstanding/miscommunication. 

[Andrea Davis-Tarantino]

Quote from @Jonathan Greene:

Welcome. It's great you are getting set up to start your investing journey, but I wouldn't recommend taking someone else's money on your first fix and flip. The first person as a mentor/consultant sounds great, but I would make sure you know what you are doing before you take on a financial partner. The reality is that they should not want to invest in your first flip because it's too risky if you have never done it.

Hi Jonathan! I can appreciate that advise but being a Realtor and and My Dad being an master electrician (with a much broader knowledge base that goes more into being a GC without a license - and no we won't use him as an unlicensed GC) I feel pretty confident that we can do our first flip and be successful. I'm bringing on my friend as a consultant to further our knowledge base and create some additional comfortability with the financial investors. I'm going through a divorce so entering this journey with my own money isn't any option currently.

[Andrea Davis-Tarantino]

Quote from @Savannah Holzer:

Hey Andrea, welcome! A fair way to compensate your financial partner typically depends on the agreement you structure. You could pay them a flat interest rate on the funds they contribute, similar to a private lender, or offer a percentage of the profits to align their success with yours. Many investors choose a profit-sharing model for true equity partners, often splitting profits 50/50 or based on the level of their contribution to the deal, but ensure everything is clearly defined in writing to avoid misunderstanding/miscommunication. 

Thank you, Savannah! That's very helpful!

[Caleb Brown]

Agreed with Jonathan. You don't have any experience doing a flip. Sure you are an agent but that's not the same. I would save money up and do a flip yourself. Hard money makes it easier to get into a deal so buckle down and save

[David Ricketts]

Quote from @Andrea Davis-Tarantino:

My Dad and I are teaming up to start a fix flip journey together. I have a friend who is further along on the path (has done 5-6 of her own) who has offered to help as a consultant of sorts. I have also been introduced recently to a woman who is looking to be a financial partner. So hard money loan in my name, down payment and carrying costs covered by her but we still need to meet to hash out the details. Here's my question: What is a fair way for them to be compensated? Interest paid on their loan or a percentage of the profit? How is this typically handled? 

Thanks in advance for any insight!

 Hi Andrea. Welcome to the community!

The journey with your dad and peer sound amazing! The person lending you money to pay back hard money sounds like a predatory lender. The fairest way to compensate them is with smile and moving on. 

Wishing you the best of luck on this exciting journey!

[Thomas McPherson]

Quote from @Andrea Davis-Tarantino:

My Dad and I are teaming up to start a fix flip journey together. I have a friend who is further along on the path (has done 5-6 of her own) who has offered to help as a consultant of sorts. I have also been introduced recently to a woman who is looking to be a financial partner. So hard money loan in my name, down payment and carrying costs covered by her but we still need to meet to hash out the details. Here's my question: What is a fair way for them to be compensated? Interest paid on their loan or a percentage of the profit? How is this typically handled? 

Thanks in advance for any insight!

 Hi Andrea, you could definitely get creative and give less interest on their initial loan and more of the split in the end depending on what your goals are.  I would recommend a mix of both that aligns with your plan, the money you are giving up earlier could be a tool or vice versa. 

[Matthew Ford]

I can help you find properties to invest in no matter the budget or exit plan. I have nationwide connection to properties. Let's connect.