All Forum Posts by: Curtis M.

Chris, your answers are exactly what I'm looking for. I really appreciate it. Pardon my ignorance, but can you expand on what you mean when you said if she wants a % of the profit, she'll make less money the longer I hold the loan.

I'm not sure I follow how that works.

@Chris and @J Scott, I'm leaning toward that also because it seems simple. BUT, she doesn't want payments. She literally wants the money to keep rolling forward. So how can I best track her total investment? Do I earmark or escrow her interest payments and once they reach a certain amount give her the option to cash out or reinvest?

And who is responsible for the tax on that interest?

Well the way I am (and my accountant is) looking at this is more of a conventional loan. She loans 50k, she gets X% back. I'm trying not to overthink it.

We'll set a timeline of when she would get the principle back...maybe 5 years? (or she might choose to reinvest)

She will have no involvement other than the money. She trusts we will make wise investments with it.

Isn't there a way to keep this pretty straightforward and clean?

That's a likely scenario. I just don't know what is considered a fair interest only percentage to offer her. DO YOU? Is it common to throw in a point or two or a slice of profit? Or just the percentage?

I'm a Real Estate newb. I'm a successful business person, but this is my first stab at real estate. Ultimately I want to do this to allow my brother to quit his blue collar job and do this with me full time. But I want the first one to go well. What I'm seeking is advice on how to creatively pay back a unique investor. I have someone who is investing $50k for my brother and I to flip some properties (this is in a low cost real estate area, so 50k can easily buy two small 2-bedrooms to rehab). I need to decide how best to invest it and of course pay her back. She doesn't want an immediate return for either interest or profit. She instead wants to have us flip the house(s) and roll her share of the profits toward the next home(s). We are not interested in renting the homes. Quick turns.

My dilemma: What are appropriate terms for this type of arrangement? Since it's not really like a conventional loan, and she's not wanting the money back right away, and I'm not interested in her being a partner...what is a fair offer for terms? I thought about a % of total profit, but what happens when in 3 years we outgrow her 50k investment. I won't want to share more than necessary. So I thought about accrued interest, either payable upon sale of the home or ongoing. But my accountant said w should put in some type of management payment for us. So my first question is what is the best way to calculate a return on her investment that is fair for all involved?

My second question is how to keep track of her investment/return. My thought was that we open a side savings/escrow account to put any profit shares/interest for her into. So if we sell a property and make money, we deposit her profit share, or if it is an interest return, we deposit that in there. Her initial 50k is used for a predetermined number of years, then she can have it back or let us keep using it at X rate. But I don't know if this is the best way. I was hoping you might have seen a better scenario for me to present to her?

So in summary...my two questions: What are fair terms for her 50k investment? and How do I track her return appropriately?

I really appreciate any insight and advice. Now I'm off to explore the site some more!