Partnership Proposal for Rehab and Hold - Quadplex

[Account Closed]

Hello,

I am in the beginning stages of partnering on a Quadplex deal. I want to get the partnership structure taken care of ASAP so we can agree/disagree, negotiate and move on.

My partner is out of state (California), and he will find the money (his network) for the down payment. According to my understanding, lender will cover 100% rehab, so we just need closing costs (fees, inspection, appraisal, down payment etc).

I am local to the deal. It’s right down the street from my short term rental property.

I will coordinate and manage rehab with the GC that we higher. 

I’ve never done this before, so I need some input if it’s available. 

Do you have a document to share? PST partnership proposal?

Is 50/50 fair?

I am all ears!

Thanks,

Nick

[Kevin Sobilo]

@Account Closed, I suspect you won't like my opinion.

I think the ownership percentage should be based ONLY on monetary contribution. So, if your partner contributes $9k and you contribute $1k, then its a 90/10 split of equity.

However, I think whoever does actual WORK on the investment should be compensated for that work. If you are managing the rehab, you should be paid for that. If you are managing the rentals, you should get maybe 8% just like any other PM would. Then you can use your earnings to buy a bigger % of the next deal!

In my scenario, its ALWAYS fair. If you get a 50/50 split from the get go with no money contributed, then you could immediately force a sale and collect 50% of the net proceeds without doing any work managing the property.