Profit split with partner

[Christina Thompson]

I bought a house for $30,000. A friend is investing $15,000 cash in renovations and doing $15,000 worth of labor to update the home. Lets say the house is complete after this. We agreed on a 50/50 split. 25% of his investment is in cash and he also is entitled to another 25% of the profit because of the labor done. If the house sells for $100,000, I would then subtract the cash invested to figure out the profit and split that in half(100K-45K=$55K/2=$27,500 profit each. Am I looking at this correctly? He seems to think we would split the sell price in half, which would leave me with a $20K profit after deducting cash invested. He would be getting back his cash15K, getting paid 15K for his work and then getting 50% of the remaining profit 20K. I feel he is getting paid for his work twice this way.

[Glenn Espinosa]

I would disagree with your analysis. Who paid for the $15k worth of labor? Did you pay or did he do it for "free" as in sweat equity? If he did it for free then he is entitled to 50% of the total after sale price eg. You take away $50k total and he takes away $50k total.

If you have a good thing going, however, I don't think I would let $7.5k spoil the opportunity for future ventures. Figure this out amiably and you'll both win in the long run.