You have no skin in the game and you are offering the private lender 30% or 70% of the profits?

As you continue with this journey, you will need to build up some skin to not let it bother you.

I am curious about this nature of the business as I build my REI business.

I was in a situation similar to yours and I have a duplex corner unit with a natural basement egress and tall enough ceilings.

You need to have "Skin" in the game meaning your money or "Family" money.You can receive "gift funds" from a "Family" member if money was given to a family member and then given to you as a gift from family it would work.Keep in mind even if the seller gives you money the bank/lender will see the deposit into your account since they ask for (2) months of bank statements.

I personally prefer when investors have some skin in the game.

You'll need to provide Entity Docs for each LLC that is a part of the transaction so that the underwriters can review them all the way down to the natural individuals/warm bodies. 

To do that, as long as you don't hit any of the standard tests (just google "material participation tests" to find the 7 tests), you are passive, and you can offset that income with your other passive losses.It will all come down to the nature of your involvement. 

Also they would like to see you have some skin in the game, which it sounds like you are working on. 

Meaning, the borrower must bring at least 10% skin in the game.