Advice on partnership structure for a flip

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Looking for some advice on how others have structured partnerships that are not so clear cut as those who bring 100% labor or 100% money. For example, we have three partners:


Partner A: Downpayment + Bank Financing for purchase + All work associated with finding, design plan, project management, and selling property

Parter B: Some cash for renos + On-site construction management

Partner C: Majority of cash for renos

What type of partnership agreement would you recommend for this type of arrangement? The short-term goal is to complete a flip, and the long-term goal is to have a property development company with an investment fund for other investors to invest cash in our projects.


How have others determined a "fair" compensation for those who put in the sweat equity (Partners A & B in this case)? I've heard that some determine a set % for "operators" v. "investors" and then divide accordingly, where some partners are acting in both roles. What does a typical distribution of profits look like for these types of partnerships?

Anything else I should be thinking about? 

Thanks for the suggestions!

@Michelle M. , what you "have heard" is similar to how I have operated in the past. 50% of profits go to the "equity" side and 50% to the management side.  Equity side is then easily determined pro rata.  I.e. you need $100k in cash to do deal: A puts in $25k, B puts in $15k and C puts in $60k, then A gets 25% of the "equity" side, B 15% and 60%.

In terms of the management side, I have always operated where it was my wife and I doing it all, so it was easy.  I am curious what you mean with "project management" versus construction management.  

But I would look at what things WOULD cost if you hired them all out. A buyers agent is 3% of purchase price, a listing agent is 3% of sale price. My wife charges flipper clients $3500 for full floor plan and layout, as well as finish selection, paint colors, etc. Everything the flipper needs to complete the project. Construction management is typically 10% of the overall project cost. I would line out those costs and then split the "management" half accordingly.

Financing, when we do it, we do not take any "fee" for it.  The cost of the loan is simply built into basis of the property for the profit split.

I am not sure what you define as project management versus construction management, so did not include it above.  

When we have used investors, we created a LLC and allocated ownership accordingly. You just have to make sure that partner C has some level of decision making, so they are not viewed as passive investor.