Thoughts on this partnership structure???
I live in Los Angeles, and I've been investing in multi-families in the midwest for quite sometime now. A business colleague, who I've worked with in the past and trust 100%, mentioned that he wanted to invest in real estate as well, but didn't know how to get started. He hates the LA market for obvious reasons, and we both have similar goals of seeking buy & holds to generate cash flow.
He's proposing a partnership where he puts all the money for the down-payments and I find the properties, which I think is very interesting since it requires no money from my end.
My duties will most likely include flying out to the midwest, meeting with agents, closing deals, and setting up the PM company/minor rehabs, while he will be providing all of the capital. He trusts me 100%, and he is pretty much going to let me decide what properties we should go after.
Now, my question for BP.... what do you think would be a fair equity breakdown for each of us? I want this to be a win-win and for both of us to feel really good and excited about the new venture.
As of right now, we're thinking of 65% him and 35% me, since I never have to put any money down.
Simple example of how it would work with a property we're looking at:
Duplex for $80k, rents for $1250.
He puts down the 25% ($20k) and takes care of closing costs to acquire the property.
Lets say all expenses total for $600/mo. Of the remaining $650, I would get $227.50/mo & he would get $422.50/mo.
We would split costs of all expenses and repairs, and if we ever sold the property... he would get his money back first, and then we would split the profits 65/35.
Is this fair, or is either of us asking for too much? We will obviously set this up through an attorney, but I'm interested in hearing BPs thoughts on the appropriate % breakdown for a situation like this. He has a lot of money, is very interested, and could easily help me acquire 2-3M worth of properties without any money down.