In reality, at the start of an investment you don't know exactly how the investment will perform.

I’m in the learning phase of my real estate investing journey.  

Any investors or locals care to share some insight on Fayetteville, Rogers, Bentonville, and surrounding cities? 

Our primary goal is to retain as much equity in our properties as possible while leveraging outside capital to scale faster.Proposed Investment Structure:Investors contribute 30% of the purchase price and 30% of furnishing/rehab costs.Our LLC secures a new purchase loan in its name only, taking on 100% of the debt.This structure allows us to maintain 70% ownership of the property.Properties will be actively managed to maximize returns, likely achieving higher upside than long-term rentals.Proposed Compensation for Investors:6% preferred return annually.After the preferred return is met, profits are split 75/25 (with investors receiving 75% of profits on their portion of ownership).Profit Calculation:Revenue – Operating ExpensesExcludes mortgage principal & interest, as our LLC assumes full responsibility for the loan.Looking for Feedback:Is this structure fair and attractive to investors while ensuring long-term alignment? 

Hi Melissa,It sounds like you’re putting in some great thought and research into your investment strategy!

Once you over pay for the real estate there's very little that can be done to salvage the investment and the inexperienced investor is the least qualified to navigate that process.

I almost gave up on real estate investing before I even started.When I first considered investing in real estate, I was drowning in paralysis of analysis.

Eventually we will pass that responsibility on to someone on our leadership team too.So the route we chose is definitely not passive, but it also made us more comfortable with the investment. 

The problem is that we need to be careful with the word "passive" because it has a very specific meaning in the tax law, and it is not intuitive.For example, losses from rental properties are usually passive but not always, there are some exceptions.

My issue is that I don't know the basics and fundamentals of investing.