Hello and thank you in advance for any guidance provided.
I have a "subject to" deal/opportunity that I am doing with 2 newbies. They approached me with the deal because they couldn't get the math right nor a bank to finance the project the way they had structured it with the seller. They were basically trying to refi the existing while adding themselves to the deed. Anyway, it was a bit messy, but besides the point in this post. At the end of the day, I renegotiated with the seller that the 3 of us could take over his mortgage (in place for nine years and low rate) and provide him with some cash (10K) to walk away from the property after transfer of the deed. I am basically the money provider in this deal. I am providing 10k upfront and all rehab cost (estimate 25k). My two partners simply brought the deal to me. They are wanting to be buy and hold investors, so I just don't feel right just offering them a wholesaling fee. They have offered to supply property management and to complete the rehab, but they are unseasoned at both. I am struggling with how to best structure the ownership arrangement as I am taking on the vast majority of the risk. Do I set it up 60-20-20 split LLC? We plan on refinancing the 4 plex after the rehab is complete and the rents have been raised. At which point if all goes as planned I should be able to recover my cost. However, in the rarity that the mortgage is called due before the completion I will be the only one that has the finances to complete the refi, so that would also be additional risk. I am looking for ideas. Thank you for any guidance or advice on how to best structure this arrangement.