Updated almost 6 years ago on .
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Contributing capital to a flip
House flip
This is probably very basic and my apologies if it was already covered. My cousin is very interested is trying out house flipping. I am more of a rental income investor. He is going to buy the house and take on the entire project on his own. I am just contributing 30k in capital for half of the renovation/rehab. I don't want to be on the mortgage. If he turns a profit I will get back my 30k and receive 25% of whatever the profit is. My question is how does he pay me after the sale and how do i declare that income. They will be no LLC or business associated with this project.
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@Adam Harvey if I were you I would phrase it as a loan at say 8-10 percent interest with a minimum of 2-3 months interest to be paid (prepayment penalty) or 25 percent of net profit, whichever is greater.
What if the profit is zero? Or he loses money? Secure your 30k as a loan against the property. If your cousin has never done this before it’s not uncommon to lose money.