Updated over 6 years ago on .
Advice on setting up partnership splits (performance based)
My business partner and I are trying to decide how to split up the partnership in terms of percentage. He'll be financing most of the deal while I'll be sourcing and managing the project. How should we go about determining the right split?
An example structure I was thinking: For a MFH property hold of 3-5 years, I source/manage the deal, I bring in 10% down and get 40% of the net income and equity. He brings the remainder of the financing and gets 60%. It'll be my responsibility to work on improving the property's cap rate. Upon our exit strategy, we'll look at the property's performance and create a sliding scale. For example, I get a higher return if the property has higher returns and a higher cap rate when we sell. Not sure how to structure that percentage yet.
Let me know what creative structuring you guys have done! Thanks.