New Partnership for buying property. And sweat equity

[Chad Kastel]

I've formed a partnership for purchasing a property. My partner and I are trying to assign value and equity to each partner.  It's our first time working a deal with a partner and both want to be fair without being taken advantage of?

Jeff:  - Providing 100% of  the capital. 

                        -  Doing all the research and making the analytical decisions

                       - Does not live in the area planning on purchasing in

Dan:    - Grew up in the area and has intimate knowledge of the streets and connections

                          - Can do ALL construction and repairs

                          - Qualified Inspector

                          -  Will manage the property.

Jeff could just hire a construction worker, property manager, repairman,  inspector (and anyone else necessary) and pay them per diam.  But decided that based on Dan's skill-set he would rather give Dan sweat equity.  Jeff feels Dan will work harder and take care of the property even better if he owns a piece of the property.

The question is what is Dan worth to Jeff?   How much equity should Dan be able to work up to?  How does it scale?   If Dan was going to earn $500 per month for all his service, does that $500 get applied every month to his equity?  Or do we do it quarterly,bi-yearly, or annually to make tracking easier?

Thanks for all you help.

Chad

[Chad Kastel]

@Bo Goebel     @Trevor Schuler @Daniel Reyes  @Caleb Heimsoth

I Wanted to reach out and thank you all for your input. Remember this is only for this deal, If I'm making a mistake, then it won't be that big of a mistake. What we decided on was an 80/20 split in Jeff's favor. Dan doesn't get any of the 20% until he actually puts in work to earn that percentage. Jeff can always buy him out by paying what Dan has paid in to the business. I'm going to be putting offers in starting tomorrow. Today Dan brought be a BRRRRR deal that has the potential to be bought for 70% ARV, so I'm getting more and more confidant in his abilities.

For non biased responses I changed my name to Jeff in this question.  I was very much concerned with getting the best opinions and not what I wanted to hear.

At some point in the future I will update with how the partnership went.

Chad