Partnership & Equity Structure

Partnership & Equity Structure

Rental Property Investor · Providence, RI · Member since 2018 · 75 posts · 35 votes

I am not sure if this is the right place for this question, but I am a real estate broker and an investor.  I recently joined an equal partnership with two others--1/3 investment, 1/3 work, 1/3 equity.  In pursuit and through the closing of our first deal, it became apparent this structure was not working.  I was equal money, but given my 18-year real estate knowledge and the top-prioritization of this endeavor I was doing nearly all of the work.  And I worry that this will be the case in most partnerships given my knowledge of the market and industry. So, I have two questions,  1) If these two want to remain as "silent" investors, what type of "sponsor" equity is standard for me?  What is standard for the amount of investment expected of me as the "manager" (I presume any "silent" investor would want me to have some skin in the game)?  And finally, what % of equity is standard for "managers"?  2) Second question involves trading equity for work--for example, with someone who will provide all aspects of project and property management?  Are there any standards here?  And how would I protect myself should a person I trade equity for work decide to stop the work and just keep the equity?  I hope this all makes sense.  Thanks for any advice.

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  • Rental Property Investor · Clermont, FL · Member since 2016 · 266 posts · 81 votes
    7y

    Awesome points, @Nelson Taylor. I have a lot of the same questions about structuring partnerships. Anxious to hear what perspectives people have. Thanks for posting your situation as an example! 👍

  • Investor · Chapel Hill, NC · Member since 2015 · 5 posts · 1 vote
    6y

    @Nelson Taylor and @Brandon Reed I currently have a similar dilemma.  Can you shed any light from your experiences? 

    Many Thanks!

    Rob Stanley

  • Rental Property Investor · Garden City, KS · Member since 2016 · 19 posts · 5 votes
    4y

    What solution did you end up with?

  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    4y

    Hello @Nelson Taylor

    The partnership is completely negotiable and should depend on value added by each partner in the deal.

    If you are giving your 18-year real estate knowledge and doing nearly all the work then you should have the share in the partnership accordingly.

    Whoever brings more value gets more share in the deal.

    All the best!

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