Help with structuring a partnership

Rental Property Investor · Kenosha, WI · Member since 2017 · 47 posts · 27 votes

Hi guys,

My partner and I are structuring our first deal together and we need help with how we should go about it. I am in charge of 100% of the capital meanwhile he basically is taken care of everything else besides the LLC and some other small things. The current deal takes place in Milwaukee where he resides and I currently live in North Carolina. So he would be moreso daily operations. We are looking for help with monthly payout percentages and also when we go to sell the property, the right way to go about payout equity.

Does anybody have prior experience with structuring partnerships that can help us please? Any help would be much apperciated.

I can also provide more details if need be! Thanks guys

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Daniel HymanBusiness Member
CPA · Milwaukee, WI · Member since 2016 · 2k+ posts · 1k+ votes
8y
@Cal Rohrman
There are some boiler plate operating agreements online that you could likely get a hold of. No need to reinvent the wheel, especially if this is your first time structuring a partnership. Typically, I see 50/50 when one partner brings the capital and the other partner does the work, but there are endless possibilities and nuances as well This is probably a good time to get an attorney and CPA on your team.
Best of luck
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Marcus Auerbach
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
8y
@Cal Rohrman a lot depends on how much you trust your partner and how well you know him. It's like getting married, consider the fact that you might get divoced - and all the sudden things can get nasty really fast.
For the sake of this I will assume that you guys met online, basically the worst case scenario.
If I provide the money for a deal I want to be the one on title and owning the property in my name. For the rehab I would release funds only as the job progresses and you want to make sure that the trades are paid and nothing else is happing to the funds. Trust but verify. I would want to see pictures of progress almost every day and video call in whenever possible.
You also want an agent (who has done done rehabs and flips personally) to look over your ARV, scope of work and budget. Feel free to reach out if I can help with that. Generally speaking the grass just looks greener over here from where you are, you will be competing with local flippers. Just so I have asked the question, what keeps you from flipping in your backyard? Some markets are too expensive to cash flow a rental, but thats usually not an issue with flipping.
I have done it with a joint bank account, which also serves as a ledger for the project. Profits get distributed at the end after the property has been sold and all contractors have been paid. Or you keep the account in your name and pay everyone directly, this way you maintain control over your funds.
Let me know if you have more specific questions! Good luck!
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