About to BRRRR, what do you pay out your investors?

[William Lindsey]

I'm looking to do my first BRRRR and have several investors. What are you strategies as far as paying them back?

Do you rehab, refi, and pay them principal plus percentage?

Do you 1031 and keep all the money growing and payout quarterly?

I'm not really sure what's the best way or should I leave to each investor on how they feel comfortable investing?

Thanks for your advice!!

[Jon K.]

My "investors", who are mostly friends and family, work with me in a private lender capacity. I pay them slightly below what I'd pay for hard money. Beyond that I treat them like any other lender: we write the loan amount and terms into a contract. They wire the funds to the title company prior to closing. We record the the loan in a deed of trust on the property and I also name them as the lien holder on my insurance.

To give myself plenty of room because life happens I've been doing 12 month terms with them but am generally doing a cash out refi 3 to 4 months after purchase for a BRRRR at which point they are paid off, again by the title company. Their money never touches my bank account.

They're happy because they're getting great returns, I'm happy because I'm getting less expensive short term loans. And I'm trying my best to keep their money working for them. So far it's been great.