Investor · Rock Island, IL · Member since 2018 · 25 posts · 7 votes
Our structure is I buy, partner rehabs, we split profits. We are typically in 60/40 up front (me 60) and split profits 50/50 on the selling of property. I have a few friends that want to give me (my LLC) their money to use. My idea is to use friend/family money along with my own to buy, and have partner rehab so we can buy a bit bigger or have more deals going at once. How do I write this up for my friend/family money? I can do interest only loan for duration or payout with interest on back end of deal, either way, my question is I guess it can be promissory note? Third party loan service? What about taxes? Do I issue them a 1099? I don't want to get caught up in some legal issue. What have you all done with friends/family money? Or even others who want to do "business" with you as hard money lenders?
You can do an interest only promissory note. Yes then you will have to 1099 them for the interest payment if it is over 600.00 a year. if the money is just going to revolve around and never get paid back then this is what I would do. If you need to pay them back over a 2 year spread or when the property sells then I would charge them for the time it will take and the attorney fees for each and every deal you do with their money. So I guess what I am saying is that they will never make the kind of money you are with their money because there is too much that it will cost you/them to set up. I think the promissory note saying I will pay you x in interest for the time I have them money is the best way.