Partnering on my first deal

[Josh Rich]

A BP friend and I have been talking about forming a partnership by doing a fix and flip deal together and we need some guidance. Here's the rundown:

We are splitting costs 50/50, profit share is 75/25 (he is experienced and will be involved in the flip, I am out of state). We are both putting in $50k, mine would be in a form of a loan earning 20% interest-only for 6 months. (sort of like a Hard Money Loan with no fees). The deal will be in his name, or the name of his LLC. We are buying at auction, site unseen.

What is right, or wrong, with this scenario? What type of a contracting agreement should be in place? Any lawyers out there who wouldn't mind sharing some friendly insights? Any hard money lenders out there who might have some thoughts on the deal? Thanks in advance for any and all replies!!

[Will Barnard]

Josh,

You have two options, be on title to secure your interests or be a lender with a recorded deed of trust. Any other option would not be secured and thus, not a true option.

Question, you state you are 25% profit share but then state you get 20% interest! is it both or one or the other? Big difference in how I answer you.

You are in CA and our usury law maxes at 10% unless you are licensed. Not sure what state the property is in, but as a lender (unlicensed) you need to be sure of the usury law there.

I will await your answer before continuing with a suggestion.