I am having a conversation today with an investor about partnering with him on a medium sized apartment complex development. His value is the money and building knowledge (he’s a GC in the neighboring state) and my value is being local to the project (he’s 2 hours away), having all the connections and knowledge of our local market, contractors, city officials, etc. Also having property management for when we are done and we rent out the units. Ive never negotiated a partner deal before. What advice and suggestions do you have for me when I have the conversation? Especially around how to split the deal financially with profits, etc?
Sheri, the most valuable part of your business can be your professional team members. I would recommend you find an attorney who is experienced in putting together real estate partnerships, especially if he or she is an investor or partner in deals themselves. This is no time to find a random document on the internet that looks like a fit for you. Legal advice for partnerships, for asset protection, for Purchase and Sale Agreements, etc. is critical when you don't have a lot of experience in a particular area.
For today's call, I suggest you make a list before the call and just discuss the roles each of you want to take on and are comfortable with. Frequently on acquisitions of existing properties, a partnership is 50/50 between the investor and active partner, but he will also bring his construction knowledge.
It is important NOT to commit to anything except to continue to explore an arrangement that suits you both. After the call, find that experienced attorney by asking people you know and he or she will help you determine terms around the roles you want to handle and a fair split of the equity.
Good luck on your project!