Structure deal with hands off partner for buy and hold properties

[Leslie Fisher]

I have a willing (hands off) partner with cash.  I'm not sure how to structure a deal to be fair to both of us.  My husband and I will be doing all remodel and we have available funds for most of it unless it includes a new AC, roof or something in the thousands.  So what is a good way to put this together?  I could do some down or closing if necessary but the partner seems willing to use his cash for all up front cost.  Any suggestions? How are these deal best split?

[Tim Johnson]

You have a few options in structuring the deal.  You could treat it like a loan where you pay the investor a fixed interest rate (9 percent for example).  He loans you the money and you repay him with interest when the deal concludes.

If the investor wants a larger piece of the action you could offer to split the profits 60/40 or some other agreeable percentage.  Just make sure you agree what happen in the event of a loss.

If you are confident about the up-side of this project, I would structure it like a loan.  If you think a break-even outcome is likely for your first project, I would offer him a portion of the profits.  Just make sure he understands the risks either way.