Suggestions on Equity split in new partnership

[Stefan Hirniak]

Hi BP!
I hope everyone is doing really well. Appreciate the help here.

I am looking for some advice on a partnership I am looking to form. I am wondering what a fair equity split is for providing capital and ongoing 50-50 financial support.

We will be investing in a few medium term rentals.  The other partner will be onsite management, set up and property identification.

Any help or suggestions on how to structure the equity piece would be great.  Ideally if we played the cards right we would have option to take some of the init you do  Equity out after adding value.

Thanks for the help!

Stefan H

[John Mason]

Search the forum I guess for previous paths  https://www.biggerpockets.com/forums/311/topics/731182-commo...

[Stefan Hirniak]

Thanks John.

[Stuart Udis]

This is very circumstantial. Nobody will be able to provide a good answer based on what you shared. Will one or both partners guarantee the debt? Is one partner's balance sheet required to secure the debt? Is the partner who is identifying the properties creating value through entitlements or is he merely looking for good value on the MLS and/or through wholesalers? Is the manager collecting fees for services rendered? These are just a few examples of factors that come into play in determining a fair structure.

[Stefan Hirniak]

Thanks Stuart.

Very fair comments and appreciate you calling it out.

My partner currently runs a few successful MTRs.  He needs equity to scale and I haven't done MTRs previously.  I am also out of state and he is local.

We likely will be buying off the MLS and trying to identify something below market value and negotiate a deal.

He will manage any cosmetic rehabs, furnishing and then ongoing management of the listing.  I will bring equity and planned to be responsible for 50% of any maintenance expenses.

Reading other articles on the forum it seems like a 50/50 split of equity in return for the work listed above may be standard but thats why I am asking the community.

Any additional thoughts are greatly appreciated.

[John Mason]

I would think about what if I did not go through with it? Will I regret it after a  year? Or will I go through with it and get some money and some experience which I can use later on in another deal?