Details of structuring a partnership?
Hey BP community, I was wondering if I could get some feedback on examples of how other people have structured their partnership with another investor who is solely a financial partner (silent partner)? What are your profit splits (I.E. 70%/30%, 60%/40% etc)?
I own a few rentals and have flipped a few houses on my own. Recently I was approached by someone (who I know well) about investing with me, and he wants us to set up a separate LLC to do mainly buy and hold rentals as well as do some flips.
He wants to provide 100% of the funding, but essentially be a silent partner, and do none of the work (he has another business that he works at full time). This means that I would be finding the deals, managing the rehab (we will be hiring the work out), accounting, as well as do all aspects of property management, etc.
I was hoping to get a few examples of what others have done in this type of "silent investor" situation when it comes to determining the percentage splits of the profits? I know there is no single correct way of going about this, but I was curious how others have structured it. What do you think a fair % split would be in this case?
I will also note that he (the silent partner) will own 100% of the properties that we buy and hold for rentals (he will be paying for them with cash, so no mortgages). We would only be splitting up any profits that are made (total rents collected - total costs). This leads me to my last question which is this: is it common to wait until the end of each calendar year to split up the profits (where I would actually receive a check for my portion of the profits), or do other partnerships do this quarterly?
Thank you all SO much for your feedback. It is truly appreciated !!