What does a proper partnership arrangment look like?

Question

I am a Realtor, Contractor, LTR/STR Investor and Property Manager. I get asked all the time by friends and family to "go in a property together" but I can't seem to find a scenario where that makes sense to me. I know i'll end up doing everything (find, buy, fix up, and manage) so a 50/50 arrangement just doesn't seem fair. I don't want either side to grow resentfull. The only reason why I would partner with someone is to free me up to purchase more properties (both financially and debt to income)...but if I'm still coming in with half the expenses and doing all the work, it doesn't really make sense.

Any suggestions?

Luka Milicevic · Answer

The arrangement you have listed makes no sense I would never agree to it.

All of my partnerships have me doing 100% of the work with 0% of the funds. My partners serve no other purpose than to provide the funds. There's no way I'm putting in 50% of the funds and doing 100% of the work and only reaping 50% of the benefits. That just doesn't work for me.

One thing I wish I knew sooner was to have an exit place in plan. At some point, you and your partners are going to have life changes and you may or may not want to be in the deal anymore. Have an exit plan in writing for when that day comes.

Eliott Elias · Answer

One person should be the deal finder/operator (no money out of pocket) and one person should bring all capital. These relationships are usually split 50/50 and mutually beneficial

Nicholas Coulter · Answer

@Sky Cornell I suggest an equity partnership. For your LTR and STR deals you have them do down payment and up front expenses. You manage and then after its live you guys split costs 50/50 and split profit 50/50. This gives them security you have skin in the game and also allows them to sit back while you work on the deal.

Sky Cornell · Answer

I totally agree but even if that means them coming in with $100k-$200k (Money down & remodel expenses)? It would take 4-5 years to recoup that and I don't see too many being ok with that arrangement which would lead to resentment IMO...

Sky Cornell · Answer

Yes Janel, I would be the Realtor, Contractor, and STR Property Manager. I could put my commission back into the deal for remodel and furnishings I suppose...but nothing more...then an even split?

Janel Kolbo · Answer

What are they offering to bring to the deal? My guess is you would be the contractor. In that case, they should be the one financing.

Brandon Carlson · Answer

Your partners should share the same risk/reward as you. In order to protect yourself, have an operations agreement in place. Highlight who the GP (General Partners) & LP (Limited Partners) create an LLC and business bank account.

What does a proper partnership arrangment look like?

Most Popular Reply