Joint Venture Question/Clarification

2 Replies

Can someone please tell me if it is typical that the active partner in a JV deal (the deal finder, manager) should draw a 10% monthly property management fee for managing the property?

Assuming the JV is 50/50, does the working partner's 50% not come from managing the property, finding the deal etc. with no money contributed to the acquisition/ improvement of the deal?

TIA

@Cody Denys

Not entirely sure, but let me add my two cents...

I think whatever you do its whatever you two agree...  However, typically if one is doing specific work they should be compensated for it as an expense.  In your case, the your partner's management fee is an expense, then you figure the 50/50 split on the profit.  Most any business is as such where even owner/members/partnership are paid their salary/wage before profits are splits.

However, then what do you bring to the table?  What can you charge for?  Is this a balanced compensation scheme?  That is, it doesn't make sense for one partner to get take a wage/salary and the other doesn't (assuming there is one ot justify).  Certainly, it can be unfair since in tight deal your partner will always get his 10% meanwhile your profit could end of coming to zero.

Sorry, I can't give you exact advice.  But, I think it comes down to you particular situation as well as the mentality of you and your partner.

Good luck.

Of course it depends on the exact breakdown of duties but if its a standard breakdown where its inactive money guy and active manager, its straight 50/50.

if its a big property and management is basically a full time job then a fee might be appropriate.

to me this is why these type of jv don't work for buy and hold...only flips. Buy and hold jv should be more equal in duties for it to not become too imbalanced over time

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

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.

We hate spam just as much as you