How Do I Handle A New Investor?
Our company already has a few properties and now we have a person who wants to invest with us(my dad). He wants us to use him as a credit source and we are not sure how to set this up. All of our properties so far have been bought without using our credit. We want to be fair to ourselves and to him. Has anyone done any deals with a family member? Did you structure a flat fee or a % of the profit. He does not live in the area we are investing and we would be in charge of finding, negoiating, rehabbing (with his borrowed funds)and selling or renting the properties. How can we handle this opportunity equitiably? 
Thanks for your help
Kecia
take his money as you would do from a private lender. give him a return on his money, not the houses. 15% to 20% return on his money should be good enough.
However, many would say not to do business with family, but treat family like business if you can. If they know you are serious, sign the neccessary forms, and call it a day.
If he wants to invest in houses, teach him how to do it and have him bring you the houses (ie birddog) otherwise, he's a private lender in my book.
My dad and I bought a fix up and I found it and fixed it up and sold it. I was paid for the construction at $20 per hour and we were to split the profit 50/50. He supplied the cash to bring the sub2 mortgage current and the rehab costs of $20,000. We could not sell it as the market was falling and we were faced with 100's of property in the area that were nicer or cheaper or ???. We finally sold at a loss of $15,000 but we got out of it. A bad experience but we are still close. It did not hurt our relationship and probably made it stronger. I have not asked to do another deal however.
Good LUCK and HAPPY HOLIDAYS
Hope this helps some
Ted Jr
Thank you both for your replies. I think I'm going to to use his money as a private lender and help him buy his own investment property as well. We want to get our company to the next level and we think this will help.
Thanks again
Kecia
I would suggest using him as a debt investor as opposed to an equity partner. This is where you give them a fixed return secured by the property rather than a % of the profit. You take the upside and downside risk while they are assured a steady return.
We're doing some deals like this and it's pretty straightforward to set up. Give the investor a mortgage on a property and also sign a promissory note with them. Depending on how good their investment opportunities are, how well you present your investment's safety and profitability and how reliable your reputation is with the person you might consider giving them any where between 8 and 20% return per annum. It'd be easier for them and you if you made payments in quarterly installments instead of monthly. It'd also be easier to pay interest only instead of amortizing the loan plus your pmts are smaller and you can market to them their whole investment keeps working for them. An LTV of 60-75% (again depending on how much confidence you've built with the person) is pretty reasonable. Don't forget that you'll have to issue them a 1099 for the interest you pay them.