Joint Venture - He Has the Capital, I Do The Rest

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Joint Venture - He Has the Capital, I Do The Rest

Account Closed
Sherman Oaks, CA · Member since 2019 · 5 posts · 0 votes

My business partner is a Brit. He has the downpayment for the initial investment. 20%. I have the expertise. Am a realtor. Will identify the property, and either flip it or rent it out. What should be our partnership split? We've not yet done an agreement and I don't want to do much more before we have a contract. I'm hoping to do a number of deals with him. He describes himself as "the silent partner." 

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Bruce Lynn
Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
7y

Why be a partner, and why not just be his agent.  You make money of the buy or sell or rental.  Partnerships are tough enough for people who know and love each other and plenty of them fail.  Probably worse if you don't know the person and they are far away.   Be his agent, not his partner.

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  • Bruce Lynn
    Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
    7y

    Why be a partner, and why not just be his agent.  You make money of the buy or sell or rental.  Partnerships are tough enough for people who know and love each other and plenty of them fail.  Probably worse if you don't know the person and they are far away.   Be his agent, not his partner.

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  • Account Closed
    OP
    Sherman Oaks, CA · Member since 2019 · 5 posts · 0 votes
    7y

    Bruce Lynn, I appreciate your advice but it doesn't answer my question. I've known this person many years. He is not a stranger. We will be investing on the east coast and we live on the west coast. I'd love it if others who have partnered up would share their experience on the financial split. I cannot represent him as his agent. I'm not licensed in the target state.

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  • Bruce Lynn
    Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
    7y

    Well if you are going to do all the work....I'd think 85% -15% would be fair split.  That's probably double for the finance person what he could make anywhere else or more.   Have the attorney draw up the partnership documents.  It really all comes down to what you can negotiate.   Flipping long distance is very very tough.  I've seen people do it, but it's like 1 in 1000....not 1 in 10 or 9 out of 10 that are successful doing this.   Who knows if he wants to do something like this, but if you think about it....banks charge something like 5% right now for home loans....15% would be triple that.

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  • Account Closed
    OP
    Sherman Oaks, CA · Member since 2019 · 5 posts · 0 votes
    7y

    Bruce Lynn, thanks for another response. I didn't provide enough detail. I will now. We are in CA. I will move to NC to oversee this deal and, downstream, others. 

    I agree. 100%. An attorney needs to draw this up. These can be flips or buy and hold properties. While I know others advocate long-distance purchase and management of acquisitions, I'm not a fan. There are certainly very trustworthy (potential) team members with "boots on the ground" but that is not substitute for personal, upfront evaluation. We all see the world through our own lens.

    I doubt he'll go for that split. 85%-15%. But you've really helped me in putting out a number. Thanks.

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  • Andrew Masky
    Member since 2020 · 3 posts · 1 vote
    6y

    Bruce, Shelley, 

    85% for money/15% for the work. Would this be both for cash flow and equity?

    Thank you for answering this basic question, but as a newbie, I need to make sense of this 

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  • Charles Carillo
    Rental Property Investor · North Palm Beach, FL · Member since 2018 · 2k+ posts · 1k+ votes
    6y

    @Account Closed

    One other option is to have the silent partner act as a strictly hard money lender. He could just lend 100% of the project compared to the normal 65%-80%. This is a very clean way of doing business. He would hold a mortgage on the property and there is no requirement for you to form a partnership. Also, after the 1st deal is completed, there is no need to do any other deals. You need to pass this all by an attorney (and also a CPA for them). He will not have part of the upside but they can always increase the rate to capture some upside.

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    6y

    @Account Closed

    Just a reminder that if you partner with a non-US person that there are various withholding requirements that may need to be done on an annual basis.

    [email protected]917-280-8544
    Basit Siddiqi CPA4.979 Reviews
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  • William BratrudPro Member
    Rental Property Investor · Maryville, TN · Member since 2015 · 39 posts · 21 votes
    4y

    I must agree with some of the other comments about partnerships, Just like a marriage they can be very tough! On the flip side, sometimes you may find a great partner! Ive experienced both and my current Real Estate partner of 7 years has been exceptional to say the least! 

    I formed an LLC with a good friend. My partner puts in 100% of the finances to fund, value add and pay my commissions plus time I spend managing each deal. I do 100% of the acquisitions process & managing the team for value add, developement, rehab, marketing and exiting. We split all profits 50/50. I make a little extra on the management and real estate commission during acquisition and exit. We each take a 25% cut of profits at the end of each deal and we each leave 25% of the profits in the company to continue growing our capital account. We typically do deals in the 500K or less range and most are done cash without loans. If we do buy and hold deals we usually purchase cash and refi after the value add or rehab and get 90-110% of the money out. In the case of a buy & hold I also make a fee on management but we allow the cashflow to be used solely for building the company's capital account. In the case that we ever dissolve the company we will split what is in the account 50/50 and sell the portfolio at a 50/50 split as well or have it appraised and one buy the other out.


    The example above is one investment "partner" that I work with. For several other investors I simply utilize private notes secured against a Deed of trust and offer them an annual ROI between 10-12% usually on a 12 month note with the option to extend if needed.

    Some would say Im crazy for doing the 50 split but When I started this 8 years ago I had no money and was 63K in high interest debt! The very first deal I did paid off 100% of my debt and put 40K in the bank. Most deals since have been that good or better so I have nothing to gripe about!

    Everyone is in a different place, you need to just start where you are, based on your knowledge and experience in the field and agree on something that benefits both sides in a fair way. Theres nothing wrong with being generous, your gonna make a lot more in the end if you esteem others interests higher than your own. My experience has been to get a foot in the door, prove your value, then soon enough other investors will start coming to you on better and better terms. The main thing is to be honest, trustworthy and find great deals! Most level headed people who have money are willing to invest in someone with this unique qualities. 

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  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    4y

    Need to put in more work than being the agent. 50/50 is always cleanest but you need to be putting some type of sweat equity. Otherwise you should only be making 3%

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