How do I divide profit fairly with investor?

4 Replies

Hello BP,

I located a great investment opportunity on a foreclosure and I will be only be able to provide about 15% of the cash needed for the full-cash purchase. I pitched in to an investor and got him on board and he will be providing the remaining 85% of the cash for the purchase. 

I was wondering what would be the most fair way to divide the profits between us. He suggested a "percent in, percent out" idea where the percent of the investment you provide, is the percent that you get of the profit. I think that this is fair IF each person does the same amount of work and shares the same amount of responsibility. However, I located the deal and will be doing most of the overseeing and organizing while he will just be providing the majority of the funds.

I was wondering how you would go about dividing it, and also how much credit you give to finding the deal and being the one to oversee and manage the flip. 

Thanks for the help!

I would pay the investor 5 % interest on the loan and that's it.

Originally posted by @Jeff Bettinger :

I would pay the investor 5 % interest on the loan and that's it.

 Really? Who would invest in that?

are you going to be doing all the work? If so use the waterfall strategy...

You don't specify the type of deal or your experience, so it is hard to comment. When I was flipping, I was getting 100% financing and paying my investors 12% or 40% of the profits. When I first started, I was paying 60% of the profit to the investor. On the equity side I also always paid them the first $4000 of profit

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