Multi-party investing deal structure for BRRRR/House hack

[Nate McCarthy]

My sister-in-law has found a house in their neighborhood that has been vacant for years, and lo and behold, the owner has passed away and the heirs are looking to sell. Lots to be figured out in this deal but let's assume for now that it's priced right for a BRRRR or flip.

My wife and I have been looking to move into a house hack in the area, and friend has just sold their house and has cash they're looking to invest in a flip. My wife's sister--the house-finder--is interested in putting some of her money into this deal, too. 

In general, I'm curious how investments with multiple investors are structured. Are returns just split proportionally according to how much each party invested? What if one party is doing more leg work? These are the scenarios I'm looking at.

Let's say the three parties (Me and my wife, friend, and sister-in-law) invest three ways, say 2:1:1, with the friend being the biggest investor. My wife and I move into the house since we are looking to move to the area anyways, and we all do a lot of the rehab ourselves, probably with my wife and I doing a little more since we would be living there.

In this case, how does the friend with cash get their money out of this deal in a time-efficient manner, since they're primarily looking at this as a flip? My thought is to BRRRR it and refinance, and they get their cut of the equity (which I assume would be split 2:1:1). However, if we paid for the house mostly in cash, does it make sense to refinance and incur a high monthly mortgage payment? This is a fundamental component of the BRRRR strategy that I have yet to understand.

Or, does it not make sense for the friend to invest in this deal if they're primarily looking to flip? I can think of a couple of seemingly great reasons to stay in the deal, which would be 1) they'd get a portion of the rent we'd be paying to live there (again, I assume this would be split 2:1:1), and 2) if we live in the house for a couple of years, couldn't we sell it tax-free, since we would be owner-occupants? Then we'd all split the tax-free profits. Or does this not apply when there are multiple owners, since only 1 of the 3 invested parties is living there?

Is there a better way to structure this deal besides proportionally splitting the profit from refinancing (and/or eventually selling) and the rent (which we'd be paying)? Again, I do not know how multi-party investments are typically structured and I'm very much looking to find out!

I'm really interested to learn how more experienced investors would approach this. Thank you so much for your insight!