I have two friends who would like to partner up on a multi-unit property. One has much more capital to put in for a down payment than myself and the other friend, and he is not opposed to utilizing his greater capital to get us into a larger property. For example, he would be willing to put in half of the down payment, if we are trying to get a property where the other partner and I could only afford to put in a quarter of the down payment. However, we would all still like to have an equal split of profits and costs after the purchase. So I am looking for suggestions on a fair way to structure such a partnership, or is the only way to do it, to have him get 50% of the profits, while me and the other guy get 25% each? Thanks for any suggestions.
I'd say that depends on who is doing what once the deal is done.
Will the Bigger money partner be involved less in the management?
If the bigger money guys is just money and you and the other partner are going to split management responsibilites then I think an even 3 way split is fair.
If all 3 of you are going to split day to day then maybe not. But how realistic splitting managment duties 3 ways?
You'll need to define each of your roles before you can come up with a split that is "fair"
This is just a common sense approach though as I'm not an experienced investor myself.
Derek, I appreciate the response. The property is likely to be an out-of state property that will be managed by a property manager. Although prior to that time, most of the responsibility for finding and vetting the investment property will fall more on myself and the other lesser money partner, but I am not sure if that alone is enough to make up for the money disparity, given that once we have the property most of the day to day activities will be dealt with by a property manager.