Investment Partnership: How to Split Ownership Fairly

2 Replies

I am going into a deal for the first time with some friends/business partners.  We are shopping for a 4-8 unit apartment complex in Kansas City where I live.  My partners live across the country in Oregon.  While they will be involved as much as possible, their primary contribution is the connection to unusually great financing (through family and family friends).  We are trying to structure the deal financially based on each members contributions.  I will be self-managing the rentals, renovating/updating when necessary, handling all tenant affairs/calls/etc, and physically maintaining the property - however I will be coming in with little or no money.  We all share a similar level of experience as landlords however I have fix & flipped three times as many homes as they have - so I have better sense of confidence with repairs/contract pricing/construction/renovation budgeting/etc.  How would you structure this partnership?  1/3 ownership to each partner and charge by the hour for my work as the property manager/handyman? 50:25:25 - since they are the money and I'm the one running the show locally?  Vice-versa? Any and all ideas are welcome and much appreciated!!! Thank you!!!

I would make everyone equal equity partners in a LLC. 1/3 to each. Talk to an entity attorney though and they can guide you on best entity to choose after you explain your situation.

Sounds like you are doing all the work and they are purely financially invested.  What is your time worth?  If this was my deal and partnership, I would negotiate a larger % or pay myself for hours spent on rehab.  Either is fair and I would bounce off of the partners what they think is most appropriate.  2 cents!  

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