All Forum Posts by: Brent O.

Thanks for your input.

At this time we have 6 properties leased and will acquire another later this month.  The money he provides is the capital to acquire and update/prepare the property for the rental market.  Usually between $17k - $20k, so yes the money is relevant.  I'm currently not taking a management fee.  More interested in growing the portfolio and equity at this time.  Would like some cash flow down the road, but that could be from dividends or pm fees.

My brother likes the returns available and hard assets in REI compared to stocks & bonds. As you stated, without my efforts he wouldn't be able to invest in real estate, at least not in this manner. He truly is a passive investor too. I just keep him aware of what we are doing and provide periodic financials, that he probably doesn't even read. Ha!

So yes, it is a pretty mutually beneficial agreement.

My business partner and I began REI about 6 months ago. The way the partnership works is he supplies the investment capital, money, and I do all of the acquisition and property management. Our strategy is simply buy and hold as we build a portfolio of single family residences. Another aspect to the relationship is that my partner is my brother.

So, I want to be completely fair in regards to an equitable return of his capital, but also not discount the work involved in all that I am responsible for. 

I have asked some REIs locally and the common theme seems to be a 50/50 split.  Here are  my main questions.

1.  Is that typical and fair?  

2.  Specifically, how are these splits done?  On first dollar or on returns, growth in equity, etc.?

3.  Should I take some sort of a management fee? Do others do this and then net the fee from the split?

I'm sure there are numerous ways to structure a partnership.  I'm really just looking for solid advice on a straightforward structure that is fair to both partners.