Rental / Asset Split 50/50 60/40, 70/30 80/20??? Atlanta

4 Replies

Need help here before the discussion goes much further with a deal proposal.

I have a business partner that has a significant amount of $$$$,  We just finished a rehab deal, by the way you can see some of my flips(wholesale and Rehabbed homes here -- 

He wants me to be successful and knows flipping won't be this hot forever, it will slow down sometime.

Eric -- Why don't we start buying some properties to Rehab and Rent out and bring income in that way?

"Man - don't tease me I said" --  Single Family homes or small triplexes or smaller apartment complexes ( 10-30 units).

Question for the forum - What I bring to the table -- I find the properties, network with agents, wholesalers, negotiate the deal, budgeting, use all my contractors, rehab the property, supply the management company ( wife's boss manages 500 doors now) in essence------ Get the DEAL DONE.

He's the money guy - that's it, he's young (50) self made and he said he's looking for something to do, bring in a couple dollars.

SOOOO my question is this -- If you are in my shoes ---What is the ask for a rental pool that if we move on this is equitable....I build up all the sweat equity and he's the money guy.

1-----Every month what is the split on the income --- 80/20..70/30..60/40

2----After a period of 3-5-7 years when we sell the property -- what is the split on the appreciation?? 80/20...70/30

Thanks in advance - I'll look for other forums or if someone could reference a blog about this.

Hi @Eric Cross ! Good for you for finding a trustworthy partner, two minds are always better than one. Few things to keep in mind here:

1. You can simplify everything by just going 50/50 on everything. If both of you believe you each bring half of the value to the team, it's always the best option to go with in my opinion. 

2. What type of return is he looking for? ROI, Cap Rate and Cash-On-Cash should all have his expected percentage next to them in order for you to better understand his expectations.

3. You can get paid a finder's fee for finding the property, contractor's fees for all the rehab and monthly management fee for managing the property. You then negotiate a split for when the property sells.

Hope that helps somewhat.

Cheers!

Damir  

Damir, I appreciate you here, thanks!

Eric

50/50 makes sense to me, but you'll go broke while building up the portfolio.  You'll need to add rentals while flipping so you're actually sacrificing flip income to bring on rentals.  You might have in your model that you refi out.  

Last but not least, I don't think splitting multiple rentals makes a lot of sense.  It's not that hard to manage one so two people doing it overkill.  See if you can figure a deal where he's your bank and you own the rentals or you find a way to break up at some point where you move half the rentals to each of you.  Plan your exits from the partnership now. 

Eric,

Not sure about the smaller deals but bigger deals (syndication / apts as an example), the money guy (ex-lender) who brings the down payment,  covers renovations budget, reserve capital and any closing costs gets a 1/3 of the deal.  He can get more if he then seeks the financing, guarantees the loan, etc.  

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