Taking on investors: a handful of unaccredited friends, $5mil or so in capital

[John D.]

Hi All-

I've found a good niche. My returns are good, the properties are quality, cash-flowing, appreciating, and the portfolio looks good. I'll run out of money in a few months if I keep finding quality properties like I have been. I have friends and colleagues I've worked with before at my day job that are very interested in getting involved.

I'd like to set up some type of investment vehicle whereby they would invest, and share the profits, minus a 20-25% management fee I would take off the top. I'd like to raise $2-6 million from 5-10 people and try to deploy that over the next 6-12 months.

While many are accredited some are not. Since there is a pre-existing relationship, I am not marketing, and they will have some control, I think I am good on some levels.

My proposal is they share in the upside minus the 20-25% management fee. And before I buy each additional property they have the option to opt-out (and would retain their interest in previous investments but not invest in future ones).

Thoughts? Is this structure similar to one you have seen? Any red flags flying? Appreciate any advice. I want to make sure I can keep rolling if things look good, when I am tapped out.