How to Structure the Deal?

[Calvin Craig]

Both partners have capital to deploy. Both have real estate experience. However, one has the credit score while the other has the rehab IQ… how would you structure the deal between two partners for starting out?

[Kim Lisa Taylor]

A rule of thumb I use to advise my clients is: 1) the loan guarantee is worth 20-25% of the deal, 2) finding and vetting the deal is worth 25%, 3) executing the business plan for the property is worth 25% (i.e., overseeing contractors/property managers, etc.), and 4) contributing the money is worth 25-30%. Think of it like a pie with 4 slices or quadrants. Everyone gets a piece of each quadrant that they participate in. If the partner with the credit score won't be participating in any of the other quadrants, then you could get the entire 75%. However, if this is a true "joint venture", all members must be actively involved in generating their own profits so the credit partner would also need to participate in decisions regarding the property such as which contractors to hire; handling issues that arise, etc.