Real Estate Agent · Greensboro, NC · Member since 2017 · 200 posts · 161 votes
What is the normal percentage for a managing partner in a Flipping/Rental business? Me and my partner currently flip and invest in rentals but I manage the business 100%. We work together on the rehab portion and split expenses 50/50. We have been splitting the profits 50/50 as well. Here is the problem. I find the deals, find the contractors (when needed), pay the bills, find legal support, organize the business, etc. I'm also a licensed realtor so I have been buying/listing the properties as well without technically getting paid. I am working with our RE attorney and editing the operating agreement. Just wanted to get an idea of how other flippers/buy and hold investors structure their business. Is 10% extra normal for a managing partner? My long term goal is to complete a limited partnership structure while creating multiple LLC's/ partnerships underneath that entity. Any advice is greatly appreciated.
For the first deal when partnering with someone else I highly recommend meeting with an attorney so they can guide the process and ensure you set up a solid operating agreement. The important thing to consider when thinking through structuring partnerships is to ensure each member is compensated for what they bring to the table. It would just depend on your specific scenario and require some negotiating to find something that is comfortable for you both. 50/50 is great, but I've seen some investors get quite bitter because they end up putting in more time than their counterpart and it usually ends any future partnership prospects.
The limited partnership and LLC structure seems strange to me from what you mentioned, though. The LLC is a very strong liability protection tool, and if you are already investing in the LLC I am not sure why you would be using a limited partnership. Also, for investors who are scaling and looking into creating multiple LLCs it is often better to use a Series LLC, due to how effective it is at scaling.
Just some thoughts. If you have any further questions feel free to shoot them my way!