How do you set up your business when multiple partners will be doing different things and providing resources? Example: Partners 1&2 have funding and will be hands on when rehabbing. Partner 3 does not have funding and will not be hands on during rehabbing, but will be responsible for marketing/finding deals.
It's clear that a 1/3, 1/3, 1/3 split wouldn't be fair, so what would? Do you split using different percentages? What has worked for you?
@Eric Armstrong Each case is different because each set of partners has a different understanding of what fair means. For instance, if Partner 1&2 are newbie investors but can not find deals, then Partner 3 will be in a position to demand better terms because s/he is teaching them the ropes and introducing them to a network, or vice-versa.
Furthermore, depending on the nature of the property/market, any one of the roles - financing, rehabbing or marketing - could be significantly tougher than the others. For instance, in a recession, no matter how good finance or rehab you have, marketing a property will be tough. Hence, in those situations Partner 3 might be in a better position to get more than 1/3 of the share.
Also, whereas real estate is a very capital intensive game, capital, by definition, is a commodity. Knowledge is the real key. Plus, everything boils down to how one negotiates.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you