How to structure this deal/partnership?
My younger sister is looking to start investing in real estate after seeing me have some success recently. I have 2 SFR and she is a no debt recent graduate.
The strategy we’ve talked about is for her to owner occupy one unit at a time of a MFH while we renovate the others, to take advantage of low money down loans. We’d both be on the loan. I would put up all the money in the deal, closing, down payment, rehab, maintenance and manage the property (we will probably get PM but i will manage all that and renovations, future deals etc). Then we rinse and repeat after she fulfills her year of occupying the property.
So I bring the business/financials/experience and she brings the ability to get 3.5% down and flexibility of renovating the units fast.
The property in question is a $400k quadplex that is fully rented at $3400/mo income. One unit is recently renovated and priced much higher than the others so I think closer to $4k/mo would be market rent for $20k in renovations.
I want to fairly pay her of course so that this will be the start of a good partnership for us both. But what is fair? It’ll take me about $40k-$50k out of pocket the get the property and renovate it but that would be 3x as much without her. My first instinct was a 90/10 split. Is that too much or too little?
Maybe just a very low rent option during the year she occupies? Like half priced rent or less? That would likely be a better ROI for her during the year but obviously if we continue, having multiple 10% properties would add up fast if the market continues appreciating like it has (big IF)
Then I’ll take full advantage after the year and she’ll be able to build up a nest egg much faster so we can do bigger deals together down the road?
And yes I’m also considering the risks of going into business with family etc.