How to split a Multi-Fam Deal

Question

I have someone who will walk me through two multi-fam deals, that I think I would like to keep and start the monthly $ coming in. He said we he would split it with me 50/50. What does that look like? Are we talking just splitting the rent on a monthly basis? He said to make him an offer that makes sense. Any thoughts/suggestions/guidance? Thank you

Jonathan Soto · Answer

Depends on how will be doing all the leg work and putting up the financing. are you experienced or is the new partner bringing the experience. if you are putting financing and leg work then I will go with a higher %. if everything is split evenly then you can go 50/50 on profit. please create operating agreement to avoid issues later down the road.

Theo Hicks · Answer

Hi Monica,

I'd need a little bit more information on the roles of you and this other person.

Generally speaking, the profits on these types of deals can be split anywhere from 50/50 to 90/10 (with the first number being the limited partner, the person who brings the capital, and the second number being the general partner, the person who manages the deal). Are you bringing the capital and they are walking you through the deal. If so, 50/50 sounds fair. Typically, the person/people who bring the money do not have any involvement in the business plan, so since this person is teaching you, you should give up more of the deal.

If you are not bringing the capital, then the split will depend on what you are doing. Did you find the deal? Will you asset manage the deal? Will you sign on the loan? All of those duties come with a % of the deal.

As for what the split looks like, it is a split of the profits. So, if you did 50/50, you would split the monthly profits (cash flow after operating expenses and debt service) and the proceeds at sale.

If you can shed more light on your duties in the deal, I can provide you with a more specific answer.

Dennis L Lewis Jr · Answer

@Monica Litster

As @Jonathan Soto explained, it depends on the contribution from each partner. You both could act as an equity partner and split he cash flow 50/50. Or maybe you act as the asset manager and take a certain percentage each month from the cash flow and then splitting profits. Im in the same boat as you right now, except my investor is just providing the funds, leaving me with everything else. So again knowing who is doing what will play an important role in how the splits are determined. Defiantly get a operating agreement that depicts that information.

Good Luck!

How to split a Multi-Fam Deal

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