What percentage should I give to my partner?

Question

Hi guys,

I have someone who is interested in partnering on the flips with me, and I would like to know everyone's thoughts on what split I should suggest on the net profit. My partner currently flips properties in my town, and is interested in doing flips in other parts of the city, but does not have the time or desire to manage the properties further away. He will provide all of the money and he also has a team in place (attorney, title company and sub-contractors and he is a real estate agent and I am not). I will find the deals and manage the rehab.

What do you guys think a fair split would be? I have heard everything from a set amount of $2000 per flip to a 50-50 split. Just not sure where we should start. This will be our first time working together, so I am open to starting with me getting a lesser percentage at first.

Michael Sears · Answer

Too bad BP won't let me change the title. I see what you are saying. I was on the elliptical when I wrote it, so I didn't realize how the title came across.  I am about to have a meeting with my investor/partner and I know he is going to ask me what I want monetarily for my part of the partnership. I am just wanting to get people's thoughts here on BP so I don't sound like an idiot. I don't want to ask for too much or too little.

Account Closed · Answer

@Michael Sears Your title should rather say, " What percentage should my partner and I agree upon?"  After all, he is supplying all the funding.  There is no way to answer without knowing exactly what each will be doing.  50/50 usually seems best for most situations but partnerships are fraught with difficulties as your post title shows...i.e. there is already some "tension" in even the way you frame the question.

Richard C. · Answer

Your partner is providing more than 50% of the value in the scenario you describe. If you get 50/50 you should be thrilled.

Russell Brazil · Answer

@Michael Sears I think part of the equation too is what experience are you bringing to the table.  If you have not done any flips before....I think I would accept what ever your partner offers.  50/50 seems like it would be more than fair for both parties. Access to funds, a team of professionals, and the knowledge and expertise that it sounds like your partner has may even be worth more than 50% if you are a novice.

Matt Fish · Answer

@Michael Sears Perhaps you could approach it like you would a deal itself - how much are you willing to take/give up, what would your ideal # be and what would your strike # be? If you didn't partner with him, could you partner with someone else? What would hard money cost you if you did the deal on your own? What are his experience and connections worth to you?

Know what you would be happy with going into the conversation, what your ideal number would be, what you would accept and what would cause you to walk away. It is important to know this going in because you are the most objective now as opposed to when you are in the middle of the negotiation.

50/50 would be good for you considering what he is bringing, so maybe set that as your ideal number and open with it. Justify it with the fact you found the deal, negotiated it and will manage the project. If he accepts, great. If not, know ahead of time where you will walk away.

Goof luck and let us know how the convo goes!

Michael Sears · Answer

I would be super thrilled with 50/50. I'm just wondering if that's too much to ask. I have flipped 2 properties before, but mostly cosmetic.

On this deal, I would be spending time at the property every day, managing the sub-contractors. But my partner has been flipping consistently for 3 years now, so he is more knowledgeable than me, for sure.

Matthew Kreitzer · Answer

That is determined entirely by personal factors, such as; Whether you want to build a professional relationship with this investor, the kinds of activities both investors are putting towards the investment, the types of tax liabilities each person feels comfortable with, etc. It is a supremely personal question as for *how much* you can or should agree to.

What percentage should I give to my partner?

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