Savannah, GA · Member since 2017 · 6 posts · 1 vote
In order to come up with the approximate 60k (dependant on the percentage) needed for down payment. I'm going to have to get creative. How do you structure a deal between friends/family? How much do you ask for, what do you offer them (term and return), and how do you deliver their money back to them?
Attorney · NJ · Member since 2016 · 1k+ posts · 794 votes
9y
Hi Mearl! There are a lot of posts on this. My best advice is that once you work out the business terms, have a good lawyer draft an operating agreement, or a mortgage or note, or whatever method you decide to take so that you don't end up with ex-friends later. A good operating agreement should anticipate most of the things that could go south and solve them without you having to figure things out as they arise, which can get ugly.
As far as what to ask for, do you intend to find the property, manage it, renovate or make repairs, pay all expenses, hire lawyers and accountants, find tenants, etc.? Or what will your role be? Are you looking to have them hard money lend or get an interest in your LLC? There are TONS of ways to structure so it really depends on your specific needs and situation.
Attorney · NJ · Member since 2016 · 1k+ posts · 794 votes
9y
Hi Mearl! There are a lot of posts on this. My best advice is that once you work out the business terms, have a good lawyer draft an operating agreement, or a mortgage or note, or whatever method you decide to take so that you don't end up with ex-friends later. A good operating agreement should anticipate most of the things that could go south and solve them without you having to figure things out as they arise, which can get ugly.
As far as what to ask for, do you intend to find the property, manage it, renovate or make repairs, pay all expenses, hire lawyers and accountants, find tenants, etc.? Or what will your role be? Are you looking to have them hard money lend or get an interest in your LLC? There are TONS of ways to structure so it really depends on your specific needs and situation.
Savannah, GA · Member since 2017 · 6 posts · 1 vote
9y
Thanks for the response Jessica, I completely agree with having a lawyer involved. I guess my question is more towards what are typical terms for a deal amongst friends. the property in question is a 4plex that I plan to house hack, so I will be owner occupant for a while and property manager. Myself and my wife will be arranging all the work, we simply need capital to move on a deal when one comes up. It's my understanding that there are infinite ways that these deals can be structured, but I'm just looking for one example, broken down, so I have a jumping off point to become creative. IE: I ask a friend for 10k for 1 year with 10% return. Do I pay him $917 a month till I've paid him back his 11k promised, or cut a check for 11k at the end of the year. What have you done in the past and what terms did you offer to generate interest and provide a worthwhile return for your friends or family if you are doing all necessary work?
Attorney · NJ · Member since 2016 · 1k+ posts · 794 votes
9y
Well, if you are going to have them hard money lend, just one person, then I would probably go with the note and mortgage and I would offer something like 10% interest for 1 year with a 6 month extension option for an additional 2 points or something like that. I would try to get no monthly interest but you pay it back when you sell, plus the interest. If they want monthly payments, maybe they will go with interest only and then pay back the principal upon closing. You can also offer them a small percentage of the profit in lieu of a monthly payment as additional incentive, or instead of as high an interest rate.