Profit split questions

[Jack Walker]

So I am starting out in real estate, and my mentor(my grandfather) and I just bought our first house to flip. The house down payment was 12k and we are both in 50-50 on both down payment and renovation costs. He has done about a dozen flips over his lifetime and has about 4 rental properties currently as well. I have no prior technical experience in this, I have only read about 3-4 real estate books and listens to probably 60+ episodes of BP podcast. I should also note that I am 21 and can work a lot harder than he can, being 72, and he has a lot more experience and wisdom to share. I assumed when we started the deal that we would be splitting profits 50/50 since we are in equal money, and although he is directing and guiding the process, I am physically working a lot harder. When I mentioned this (being a week into rehabbing) he told me that it was quite unfair to go 50/50 since without him this deal wouldn’t be happening. I understand that even if it was a 99/1 split it would still be worth it for the experience and to say I’ve done my first deal, but since I am in equally money wise, I am wondering what a good split would be. Has anyone been in similar situations? Does anyone have any input? I am not trying to be greedy by any means as I am very grateful to get my hands dirty on this first deal no matter what the split would be, but Im still seeking value as any other person would. Any suggestions?

[Thomas S.]

I would be thankful your grandfather is leading you through the process and getting you established in the business. Your money is buying experience. For this first one obviously you should have had the discussion in advance and had a lawyer draw up a partnership contract. Regrettably family usually is not that smart.

At this point I would be asking him what split he wants and go along with it 100%. You do not have any other options and, family wise, are not in a position to negotiate. Take what he offers, keep everyone happy, except maybe yourself, and keep your feelings to yourself.

Make the wrong decision and you will regret the outcome relationship wise. You made a mistake going in, don't compound the problem now.