Short-term bridge loan ; halal partnership or not?


I found an extremely experienced real estate developer (Manager) to partner-up with in the States; a true mentor in the real estate field. This is how the partnership works:

1- I open a business account & fund it; remain in full-control of the account
2- I give him management access to the account
3- He invests my funds in a vetted property - cash buy-out
4- Works with his trusted vendors/developers for rehab
5- After rehab, sells the prop to his vendors/developers at market price*
6- Sales proceeds are divided 50/50 between investor (myself) & manager (guy managing my account)

So far so good…

*Now, for #5 he calculates the sale price be around fair market price, using primarily these factors:
—Fee in Points
- Fixed percentage of total funds invested. E.g. 6% of $100k investment
—Duration Fee prorate: if over 120 days
- Charged daily if deal goes over 120 days, to keep vendors/developers inline with the promised schedule. They get penalized for going over the 120 day-mark.
—Interest Rate (arghhh)
- Fixed percentage of funds, as they are pumped into the project. E.g. 12% on $100k purchase prices on Day1 + $35k rehab fund from Day15, until whenever the property sales.
- This is the frustrating bit; just the use of word “interest” gives me a chest pain. I’m fully funding the project, manager will manage end-to-end buy, rehab & sale process directly to his vendors/developers, vendors/developers are given a schedule which essentially spells out how much they end up paying at the end of deal.

Question: Is this really interest? Or a partnership where the end cost is dictated by the fair market price of the property? This is so frustrating how one can’t get involved anywhere without touching riba!

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Wa Alaikum AsSalaam wa Rahmatulla wa Barakatu,

I have the same question and await for an answer!

Kheir Inshaa Allah

As-salamu Alaykum Wa Rahmaa Tu’lahi Wa Brakatu,

This is interest.

Reasons why:

  1. they are implementing interest with intention
  2. there is charge on loans/transaction
  3. can be considered as financial exploitation through increase of charge over periods.

Please also read this:
What Is Riba in Islam, and Why Is It Forbidden?.

Now, if it is in the case that you have already invested and cannot legally get your money out or it might cause too much distress/difficulties, and you take your funds out with profit you can donate your riba portion of the profit or the entire profit if you want to be certain of removing interest.