Partnering with "a money friend"

[Daniel Rubenstein]

Question- there is probably a cool, professional way to word it, but I was wondering:  if I wanted to work/partner with a friend of mine who has the funds -but none of the time, knowledge, or contacts to find and manage properties- I would find the properties, find renters, and manage the property, and he would lay out the %25 down payment.  What is a fair way of splitting the ownership and/or division of profits (from both cash flow, and an eventual sale)??  I would present the deal to him, and if hes interested he would lay out the funds..

(I am not interested in just borrowing the funds for various reasons; mainly because I have this uncomfortable feeling of owing a friend this much money...even if I know it's somewhat secured in a property)

Is 50/50 split ownership fair? or is that too much for me as I have no money invested? What is "typical" in the REI world? and/or what do you think is fair regardless?

TIA!!

[Caleb Asbridge]

Daniel, would your friend be participating in any way in managing the business?  Or would he/she simply be loaning you the money?  Your parenthetical reads to me like you don't want to just borrow the money, but your description doesn't look like your friend would play a management role.  My attorney has advised me that I should only partner with someone when they play some role in the management of the project or when there is a clear description of our roles and duties within the partnership.  As I understand it, if the "partner" doesn't play any role in management, then they are a "lender" and not a "partner" at all.  Here's a link to a blog article on the subject.  Full disclosure: I am a client of the author's law firm but this article is not an advertisement and is freely available for information/education purposes.  Hope this helps.