Why can’t I understand this?!

[Riley Holt]

So I understand the private money lender as it pertains to say a flip. I find the deal, private money lender pays the down payment plus rehab or something close to that, once done I sell the house and after the investor recoups is investment we split the profits. But how does this work with buy and hold? We split the profit of monthly rent payments? What about the money that should be set aside for repairs and vacancies? I just can’t figure out how that works?!  Sorry if this is a stupid question but I’m about to enter into this next scenario with my brother and I want to make sure we are both getting a fair shake. FYI he lives in a different state and he wants to invest where I live  

[Don Konipol]

@Riley Holt

The scenario you described is a private investor partner, not a private lender. Lenders loan money and receive a fixed rate of interest, not a profit split. Further, few lenders will lend in second position, and none for the down payment. A private lender loan is used instead of a conventional loan, not in addition to. Used when a conventional or institutional loan is not available, or when money is needed fast.