Fair equity compensation for a silent investor of Buy & hold

4 Replies

I want to preface this post by saying that I fully understand that every partnership is completely different. With that said, what is a fair equity distribution for an investor that is putting up 100% of the cash and acquiring the mortgages. Other then some minor administrative work every once and while, that is all the investor would do.

Not sure how much of a difference it makes, but each investment is bringing in a 35% return on cash or higher.

I'd ask more along the lines of what you are doing to determine what the appropriate amount is.  If you are doing all the work, but they are putting in all the cash, I'd say something like 60/40 or 70/30 isn't unreasonable.

If there's a property manager, and all you are doing is picking out the places, and maybe making some quick phone calls, I'd say 80/20 or even 90/10 isn't unreasonable.

I do 100% of the construction and property management. I also find most of our deals off-market some I'm hustling on that front as well. We save about 20% on our construction costs because I GC everything. 

We do ground up construction as well as gut renovations to properties we buy. We have been going in with all cash and pulling out 100% of the investors money when we put in the permanent financing. We build enough equity and cash flow once the rents are stabilized that we have never once had a problem getting all the money out during the refi

 Looking for some advice on how to properly compensate an individual for brokering the sales and managing property. I am providing all of the funds for the transactions along with any funds for rehab or updating. All of the properties are in my name. This individual performs all of the active responsibilities of managing and acquiring the properties. I am interested in sharing equity and paying him a management fee. I know that there are many ways to do this, but could really use some insight into how others are doing this so that I can be equitable.

Thanks in advance. 

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