Split profit or pay interest, how to structure a partnership

[Paul Bowers]

I have a friend who has some available cash. He is aware I have been starting my journey with real estate and has expressed some interest in possibly partnering on a deal. He has two young children, full time job, etc. and is basically just looking to provide cash and have me handle the flip. My question is how should I approach the partnership. Should I let him fund it completely, I do the work and split the profits or should I just treat him as a HML and offer to pay interest to use his money? How do you decide which avenue you want to pursue when talking with potential partners?

[Bryan O.]

@Paul Bowers you're asking what's the right way to eat a Reese's ;)

Find out what your friend is interested in. He may be all about equity and less about risk and want a portion of the deal. He may be all about risk and want a defined payout with guarantees. He may be anywhere in between. You could offer him 10% interest and be done. Or a set interest rate (i.e. 7%) plus some portion (i.e. 30%) of the profit. If he just wants equity, make a partnership and he is 50% of it. Lots and lots of ways. These are just some quick examples.