How to partner correctly

9 Replies

I have a question about partnerships. I am ready to go into a partnership for my second investment property (first was on my own) and am writing up a proposal. This will be a multi-unit rental investment deal.

I'd like to do a 50/50 split of earnings, but am not sure who should be the mortgage holder and 'owner'/deed holder of the property. Should we both be listed on both? Or is there any reason/benefit for only one person to be listed on both or either?

Any advice would be greatly appreciated.

If its a 50/50 split then capital, mortgage holders, responsibilities should be equal.. I would think it would be less beneficial for someone that holds the mortgage alone. 1) risk is on them in case of default 2) mortgage tied up under their name/company

Thanks! @Hai Loc . What if the 50/50 split is just of the earnings, but I am only bringing the hustle (analysis, visits, oversight of day-to-day management, etc.) and the partner is bringing the hard money? Would that change your thinking about things? Thanks!

Originally posted by @Candice P Novak :

Thanks! @Hai Loc. What if the 50/50 split is just of the earnings, but I am only bringing the hustle (analysis, visits, oversight of day-to-day management, etc.) and the partner is bringing the hard money? Would that change your thinking about things? Thanks!

I think that would be a fair split

 

The truth is it can be organized anyway that ads value to both parties. For example I've seen the following

Option 1: 

- You do all the work, they put up all the money 50/50

Option 2: 

- You do all the work, you each put up half the money 50/50

Option 3: 

- You both split the work and the money equally


Each is 100% reasonable depending on what the other person wants or needs, when in conjunction with what you want and need. Put something together and just make it happen :) 

@Yasir Einaudi - That would depend on both peoples situation. The frame of mind someone new to this business needs to have is one of "what does it take for me to get this deal done successfully" & "how will completing this deal help me in the long run complete more deals".

If the scenario was that I had a great deal with a 20% annualized return, but without the extra money for the downpayment I couldn't get the deal closed.... It would be a deal I would be thrilled to take to make it happen. 

Sometimes people get caught up on the splits... 50% of Zero is zero. ;) 

I understand your point @Steven Pesavento , that a deal is better than a no deal. Specially when you are starting out. After a few rehab deals, you gain the leverage in experience which you can offer it in exchange of the value of money/financing. Hence my comment. But yeah, if you are starting out doing everything and offering to put half of the money is way better than no deal.