BRRRR profit split !!

3 Replies

Hello BP Fam !! I had a question about splitting profits on a BRRRR. My plan is to retain ownership of the property after the refinance and split the profits. If anyone has worked with 2 or more entities on a BRRRR I would definitely appreciate any advice!!

@Thomas Smith , I would make the relationship simpler because it really isn't a partnership. You aren't working for the same long term purpose.

I would have these other people lend money on the project and give them a lien on the property. They would get a guaranteed rate of return and you remain as the sole decision maker since YOU will be the one who has to hold this property long term. Someone who is just interested in a return upon refinance has different thinking than someone who needs to maintain a property for a long time.

If these other people will have any active role in the rehab, I would compensate them for their work.

This way its a simpler and more fair relationship and reflects the roles of those involved. 

Thank Kevin, the other parties want nothing to do with the rehab or maintaining  a long term rental but I do. That’s why I thought it best to give them their return on investment and move on to the next project. I am the one securing the financing and facilitating the rehab along with supplementing holding costs. That’s why preferred to property in my business his name. Does that change your opt at all ?

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@Thomas Smith if someone is providing money to execute on a transaction but doesn't want anything to do with the property we would call that a loan. That's all. So treat it just like a normal loan. The concept is there, however (and this is a big however) how you actually pay them back might be a little challenging. With a BRRRR you don't sell the property, you REFINANCE. And since you are refinancing, the amount of money you get when you REFINANCE will depend on your long term lender. How much you pay for the property and how much repairs will be are also numbers to factor in. So logistically you need to account for several things but conceptually this is just a loan.

Feel free to ask anything additional if you need.  Thanks!