Percentage Split for Partnership Deals
I'm trying to figure out a fair way to split deals with my son. I'm a brand new RE investor (haven't even done my first deal yet!), and planning on partnering with my son. He's the brains, lead generator, agent, and property manager of the operation (I trust him completely, he's a rock star), I'm basically providing the money. In essence, he's helping me get started in the business by doing the legwork and finding opportunities, etc. He'd prefer equity in the deals instead of flat out payments or a loan, but I don't know what is fair. Some specific examples:
- If our first deal is a 60/40 deal (my $60k, his $40k)...1) Is his work worth 10% to make it a 50/50 split?
- What about future expenses, e.g., if I have to put in another $5000 to upgrade something (now it's my $65k and his $40k), does that change things?
- If it's a major flip, let's say another of my $50k is added, making the split my $115k and his original $40k, or 75/25 - makes me feel like the original 50/50 is not as fair as what it was when we started.
Is a flat "+10%" fair - so at 60/40, it changes to 50/50. But at 75/25, it changes to 65/35, accounting for my extra money, but also his bonus percentage. Is 5% better, 15%? I came up with that range of percentages based on what an actual loan would be (conventional all the way to hard money).
I am trying to keep it SIMPLE, avoiding complicated calculations, loans, etc. We will be doing both Rentals, Fix&Flips, and BRRRR properties.