San Diego, CA · Member since 2018 · 10 posts · 4 votes
An investor and I want to partner up 50-50 to purchase a fix and flip. I will be on site with the GCs day to day - my investor partner will be the silent type working his day to day job unable to do any of the on-site stuff at the property. The question was brought up of how to resolve conflicts such as when we disagree on, for example, purchasing a $1,000 chandelier, when the other party does not want to spend that amount. What are some ways to ultimately decide who wins with these monetary decisions in a joint venture? Do like @NetworthRealty does with a deck of cards and highest one wins?
Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
8y
You have a budget, if $1000 is the fixture budget for that light, buy it. if the budget is $200, then find a $200 light. I agree on getting the terms and decisions in paper before hand and adhere to them.
Rockledge, FL · Member since 2016 · 493 posts · 427 votes
8y
Kevin,
These things should be handled in the partnership agreement up front. If they aren't, you can always modify the agreement.
As you are creating the partnership, make sure that you are identifying, negotiating and solving as many hiccups as possible along the way. There are several ways to do this, as you mentioned, so it's up to the partners to agree.
If I were in your shoes, I'd give your money partner 51% of the profits while you retain 51% of the decision making.
That avoids the situation where your money person hamstrings your efforts to get the most money for the property. The on site person should be making most of the decisions. This should be done in consultation with the money person, but the person with the most knowledge should take the lead on that matter.
Likewise even if you have 51%, you should sometimes defer to the other party if you feel they have good points, or you are relying on their expertise and experience.
Davis, CA · Member since 2016 · 595 posts · 344 votes
8y
so I will devils advocate... we are assuming OP is going to be the voice of reason.... and silent partner wants to buy a gold plated toilet... what if OP is the one chasing an episode of fixer upper...? What does silent partner do in the partnership agreement if the on site 51% is pissing away $?
Davis, CA · Member since 2016 · 595 posts · 344 votes
8y
it has to be tough... I think in the end it is just making sure that before anything even thinks about going on paper, that partners are very much on the same page on goals, scope etc...
Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
8y
You have a budget, if $1000 is the fixture budget for that light, buy it. if the budget is $200, then find a $200 light. I agree on getting the terms and decisions in paper before hand and adhere to them.
San Diego, CA · Member since 2018 · 10 posts · 4 votes
8y
I like that gold toilet example as it shows just what *could* happen with frivolous spending partners. I think so far what sounds fair is the 51%-51% deal @James C. called out - like how I treat my children when trying to split that last piece of cake. One kid is allowed to divide the slice - the other chooses between the cut slices.
Rockledge, FL · Member since 2016 · 493 posts · 427 votes
8y
@Carson Wilcox - It is tough, that is why significant numbers of partnerships end in animosity. If you listen to the BP podcasts, and do some digging on partnerships, almost all of them are family helping family.
If you are going into business with family, then you are mostly on the same page with them. If something were to go wrong, there is so much at stake, neither party will want to mess up the family relationship (usually).
@Kevin Ely - I completely agree. Abraham and Lot were onto something (and still are today!).