Funding & Management Partnership

2 Replies

Has anyone been involved in or know someone who has attempted this: A friend of mine is interested in my real estate buy and hold strategy and sees how we have grown over the past few years. We discussed forming an LLC where he could provide the 25% down payment for a commercial loan, and I would manage the properties, and we would split the profits.

If you did this, what was the % split between the financier and the manager? Thanks everyone!

What names are going to be on the property's title. If your name is not on the title then you are only a manager. You may think you can form an LLC and still be entitled to a percent of the profit, but I have a saying that says, "He Who Holds The Money Rules." If you think the LLC partnership will help you get your share think twice. Later, down the road, the LLC partnership won't be worth the paper it is written on when things go south.

You really need an attorney and in most states there are many laws you have to abide by when forming partnerships. The problem I always have with attorneys is they take your money and make believe they are protecting your, but there are so many laws and requirements they really can't cover everything when writing contracts and partnership agreements. That is why so many people have to go to court to settle what the attorneys did not cover.

As for the percent you want to split. It depends on how much your partner has his hands in the deal. We had a similar post last week where someone was forming a syndicated partnership. This is something you should do. You will be the general partner. Your friend is the limited partner. You do everything and your friend only puts up the money. In that case, a very fair amount of the profit for your partner is 10% to 20%. 

@Jack Orthman Yes, we have attorneys that draw up our LLCs. Regarding the splits, is that 10-20% gross or net revenue? My goal is not to make a whole lot of money until I quit my W-2 job and am investing full time, and he is going to want to see some kind of return soon.