JV Partnership percentage ratio

[Justin Currie]

Hello BP, 

My partners and I are looking at putting an offer in on a property to rent out on Airbnb in a resort town here in Canada.

I would be obtaining the mortgage in my name and assuming all of the risk, my partners (a couple working as one) only want to add cash to the deal. We would be splitting the 25% down payment right down the middle. In this scenario, obviously the profit ratio percentage would change. 

What is a fair ratio given the above situation? 

Also what is a fair ratio pending my partners are not on the mortgage but assume the risk of any losses through a separate contract? 

Any info or ideas are greatly appreciated. 

Justin

[Rick Baggenstoss]

There's no right answer, but I would encourage you to think through the whole deal including the exit. 

 Here's an example:

-  Cash In - $100k -- 50% (1/2% per dollar) of appeciation + 30% of operating profit

-  Mortgage Resp -- 50% of appreciation + 30% of operating profit

-  Hosting Resp -- 10% of equity + 20% of operating profit

-  Maintenance - 10% of equity + 20% of operating profit 

Forced Exit in less than 5 years - No % of equity.

No cashing out of operating profit until $10k maintenance fund established.  

Hope this gives you a head start.  Would love to hear others' perspectives.