Partnership particulars for Flip

[Joel NA]

Need help figuring out this partnership agreement!

My partner and I are preparing to conduct our second REO rehab together. We completed one a few months ago and were happy with the results.

We do most of the rehab work ourselves. For this project, one of us is going to have more time to work onsite than the other, but we're putting up equal money for the cash purchase and will split the materials, holding, realtor and all other costs.

We're having trouble finding the right way to pay ourselves for our own labor. We think one of us could spend as much as 10 times the amount of time working onsite as the other. .

Some problems we've considered include:

1. Guy who works onsite fewer hours will earn more per hour if profit is split 50/50

2. We "paid" each other out of our profit last time but the hours were more equal then-- now we're having a hard time deciding upon an appropriate wage to pay ourselves if we choose this route...

3. Guy with less hours could want more worked subbed out depending on agreement-- whereas the guy who can work more will want to get paid to increase profit

4. We're having trouble determining how much our money is worth..and how much our time is worth.

5. Providing worst-case scenario assurances in the partnership agreement is key for us...we have a friendship to protect as well as our own financial interest..

We need to flesh it out more, but we're leaning toward paying ourselves between $30 -$50 for our own labor, then splitting the remaining profit. That figure-range seems to be a compromise between a straight profit split and strict "per hour" profit split.

Anyone have any thoughts? Thanks in advance!

[Justin S.]

Option 1: Pay a contractor/handyman $50-$100 to provide you a quote for labor for the job. The "working" partner gets that amount in addition to the profit split.

Option 2: Clockin/Clockout like an hourly employee. Determine your hourly.

Option 3: You and your partner seem to have a good thing going. Your time is probably better spent looking for the next deal. Outsource all rehab work and get your next deal lined up.

Option 4: Make your partner a silent partner and determine a different equity split.