Fair partnership proposal

[Michael Lautenslager]

A partner and I are purchasing and planning to quickly sell a condo. What would be a fair consession or agreement considering what we can each bring to the table?

We were trying to keep it as close to 50/50 stakes as possible and running through a few scenarios. We feel we are close but know one party or the other just may need to make some small consessions or adjustments so that all seems fair. 

so I'd like to know what this community of new and experienced investors seems fair.

The condo purchase price is $885k. The loan will be a commercial loan with 30% down. Sale price is projected to be about $1.05M

Scenario 1. Party A would like to bring cash for their portion of the deal. Party B needs to finance. Lender said the LLC partnership can purchase the property and they could assign the debt gaurentee to the LLC member of Party B. In this case Party B could still put money down but the LO said it would not be required.

scenario 2. Party A brings less than 50% cash (approx 150k). Party B brings rest of 30% down payment and is still the gaurentee for the loan.

we are both confident we can sell quickly. So carrying cost can be managed. We agreed that we should discuss and consider our plan for paying for carry cost while trying to sell and during closing. If we do not get our target price we also agreed we want to discuss and have a plan for a hold and use as a STR. We both have STR condos under management companies so we know how it would be run. But we want to agree how we pay for carry costs and eventually get to a 50/50 stake.

Please provide your thoughts and experiences. Thanks!

[Joe Villeneuve]

The answer to your question is, as it usually is, hidden in plain sight within the question itself.

If each of you are contributing different things, each of these "things" (I will refer to them as "roles"), has a different value as it relates to each of the other roles.  NOT a percentage, just a number from 1 to 10.  So:

1 - list all of these roles, then AFTER this list is complete, without regard for who is doing what (this may change),

2 - assign a number from 1 to 10 to each role...there can be duplicates since some roles may be equal in value.

3 - Now assign each role to each partner.

4 - Then add up ALL of the numbers from the main list (Step #2),

5 - and divide 100 by that number.  You should come up with a master percentage (decimal).

6 - Now add up all the numbers that were assigned to each partner (Step #3),

7 - and multiply that number by the number you got in Step #5.

These are the percentages each partner should get, which are based on an agreed on relationship between the roles that each partner performs.

I've NEVER, in all the partnerships I've set up over many long years of using this method, have I EVER had a problem with the results.  Even the ones where I thought the partnership would never happen (first couple of times I used it).  Now, I just state this is how we are going to decide the percentages, and we move forward.