Private Money Deal Structure For Short Term Rental

[Jacob Reeves]

Hey BP! I’m 22 and a rookie investor. Currently just soaking up as much info as I can before I get started. 

Here’s my situation...

I have a very wealthy investor/mentor that I’m confident will partner with me. 

I’m in Tennessee and from everything that I’ve read, the pigeon forge/gatlinberg is the closest and most established short term rental market to me so I’d be looking to invest there. 

My question is... what’s the best way to structure this deal with my investor? He will likely be putting down 100% of the invested capital. I’ve heard of people doing either an 80/20 or 70/30 equity and profit split with a situation like this. 

I would be self managing the property and my investor would be mostly hands off. 

I would love to hear any advice as well as any resources that I could study more about private money and short term rentals. Thanks so much!

[Landon Bleau]

Great question, I too am looking for a cabin in the Smoky Mountains. I would ask them what they feel the most comfortable with and go from there. Since you are doing all the leg work, I think splitting the cash flow is very fair, and a 60/40 or 70/30 equity split after the down payment is returned to the investor is very fair for them. They'll likely be able to get 15-20% CoC return even with split profits.