Rental Property Investor · Naples, Campania · Member since 2019 · 18 posts · 9 votes
Hey all! Long story short, I have been living abroad in Italy for nearly 2 years, and after sharing my experiences in the Italian market will fellow investors they are wanting to partner with me on future projects here in southern Italy.
The strategy will depend on the investor, however I am currently looking to secure a deal to purchase and rehab a property, and then turn around and rent it as an AirBnB. Increasing property value, and monthly cash flow.
They will be structured as cash deals, and I will be the working partner. Meaning that I will:
Manage the property.
Manage the rehab.
Perform market analysis.
Perform property analysis.
Make offers.
Negotiate.
Inspect.
Close.
Purchase furniture.
Stage/setup for short term rentals (and manage them going forward)
What type of equity split/profit sharing would you ask for in this scenario if I was...
A) Putting in half the cash to purchase the property/rehab.
B) Not putting in any cash, and just working the deal.
I appreciate you taking the time to read and respond! :)
Rental Property Investor · Kanab, UT · Member since 2020 · 3 posts · 1 vote
5y
Hi Amber,
Did anyone ever give you any feedback on this? I am going into the exact same situation and trying to determine if I should put in capital or not, and what is fair for both parties in either structure.
Real Estate Syndicator · Phoenix, AZ · Member since 2018 · 903 posts · 1k+ votes
5y
@Amber Roy Looks like this never got a response, but here goes...After partnering on multiple JV, syndications and simply private lender arrangements, it depends. Here are some arrangements we've used :
100% management/acquisitions by our team. Partner is a private lender or debt partner for supplying 70%-100% of funds.
100% management/acquisitions by our team. Partner/s are a 50/50 equity partner for supplying 100% of funds.
100% management/acquisitions by our team. Partner/s receive 70% split of cash flow/profit ROI for supplying down/rehab(40% purchase price).
100% management/acquisitions by our team. Partner/s receive fixed 12% or more preferred ROI for supplying down/rehab(40% purchase price).
So, it depends. Depends on your partner, on the deal, on your role, depends who owns the liability(loan), depends on the relationship, etc. My biggest recommendation is not to sell yourself short. If the relationship is new, I would start with private lender partner as it keeps the lines of responsibility clear cut. If the relationship is well-developed, a equity split would possibly be worthwhile, just ensure everyone knows their role.
A ) Private Lender arrangement
B) Private Lender arrangement and/or 10-50% to partner
Sometimes you also have to give up some to gain credibility. So if you are new at the business, giving up more equity to get that first deal done to build your credibility can also be worthwhile.