Paying back friends/partners on Buy and Hold properties!

[Justin Brown]

Hi BP forum,

I was wondering if someone could help me out or point me towards resources that address how investors work with partners to finance buy and hold properties. Specifically, this scenario: I have some cash for a down payment on a buy and hold property, but the money I have will only cover about 75% of the down payment, so I'm considering partnering with a friend who would give me the remaining amount in cash. He would give me a small fraction of the down payment and I would pay the rest and handle all of the other aspects of the purchase and maintenance of the deal once it goes through. 

My question is this: how do investors usually arrange to pay this friend/lender back? I know there is probably not one answer to this question, but I'm trying to get a general sense of how people make these arrangements. Would I just tell him I could pay him all his money back in a year (which would be easy for me to do financially)? Should I pay him back on a monthly basis with interest as if this were a regular loan? Should we split the cash flow over the full term of the mortgage since he is a partner??  

Any feedback would be greatly appreciated.

[Nnabuenyi Anigbogu]

There is no one way to structure it and everybody on here can give you a separate unique way to do it. It all depends on what you and your friends goals are. 

Is he just trying to help you buy real estate or is he looking to partner long term and buy real estate himself also. If he is just trying to help you then you can negotiate a fair loan term and interest rate that you both agree on and that is it. If he wants long term partnership then you discuss how you want to handle it based on the fact that he is bringing 25% of the DP. One way would be to leave all the buildings revenue in a neutral separate bank account and then at the end of every month, quarter, year, etc? you disburse any amounts over what is to be left for reserve between the two of you.

These are just a couple of ways to do it.