Partnership

4 Replies

I'm considering a partnership on a Student Rental. My partner is new to investing but has the capital required for 50% of the down payment. The question I have is how should we structure the deal. We both will put down 50% of the down payment and the property will be fully tenanted and management in place at purchase. Should we split everything 50/50?

I have been investing for 6 years and have 5 properties(8 doors), spent time, energy and resources educating myself. We will be using my agent/coach, lawyer and lender. Is it greedy of me to think that I should either have more of a % or be afforded more of the cash flow for this experience? 

Any thoughts or advice would be appreciated. 

Thanks,Heath 

Hey Heath,

Usually the person that comes in with the most money gets more % on there investment. But if you and your partner are both coming in at 50/50 then you both should get 50%. 

Hope that helps. 

Isaac Blocher

Yea stay 50/50 cause he did technically despite your experience help you get more income. 

@Heath McCormick

I think a lot of it comes down to whether or not there is demand to invest with you at this time. If it's an early partnership, I suggest going 50/50 because your track record is limited. 

If you have partners coming out of the woodwork, you can command a little more in the deal. I would just make sure to spell out your value add, and then document the places where you are doing that. At the end of the day, you want a happy investor who will do more deals with you, not necessarily a 'one-time' 10% bonus.

There are other creative structures to solve issues like this that can be used.  For instance, 50-50 until you each receive your capital invested back (possibly plus some return) and then you get a slightly higher stake.  That rewards you for your experience and effort, while providing some financial protection for your co-investor.  FYI, if you each put in equal capital and get different percentages ownership, there can be unexpected tax consequences, so be sure to talk to your lawyer and CPA if you go this route.

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