Fair Equity % For Capital Raise, Acquisition, Rehab, & Management

[Joel Barrett]

I've created a small portfolio of 1-4 family properties, where I've found, purchased, project managed a team of contractors through rehab, financed, refinanced, and managed the properties independently. 

I've now been approached by investors through my personal network, and I can see the opportunity associated with taking on investor capital; however, what is the best way and structure to take on the additional capital? 

My thoughts are - use the capital to gain an equity stake in the company without investing any of my own capital, use the capital and provide capital of my own and take a percentage equity stake, use the capital and pay a fixed rate of interest (approx. 10%). 

If I do go the equity route - such as taking 10% initially in additional capital for my services, should I also charge management fees down the road - or should these two activities be separate? 

It's a lot easier to figure out going the fixed interest rate route; but it would also depend on the requirements of the investor (whether they want equity, or a fixed rate of return). 

[David Fritch]

In the lending scenario, are they getting a trust deed and promissory note as security or just a promissory note? ie is that the money you're using to buy the house with or are you using it as a down payment + rehab + carrying costs?  

So I guess what I'm asking is; walk through a hypothetical deal, roughly how much money are you getting from how many parties and what are you using the money for?  Then 2-3 options on how and when the investors money might be paid back. I think your answer is in those two questions. 1 What is your investors risk/security? 2 When and how would they like to be paid and does that mesh with how you'd like to be paid? If you answer those you have a pretty good starting point for structuring the deal.