Rental Property Investor · Dearborn, MI · Member since 2015 · 177 posts · 48 votes
Hey Everyone!
My partner and I are setting out on a flipping/direct-mail campaign. I am out of the country which leaves my partner in the "boots on the ground" position. Just trying to figure out a fair value of that work compared with the risk of me putting up all the funding.
What are your opinions of a 50/50 profit split based on the following partnership structure?
Me:
1. Splitting cost of monthly marketing budget 50/50.
2. Putting up the funds for the deal. (20% of purchase price & rehab, plus closing/carrying costs.)
3. Helping with the marketing/direct-mail campaign.
Partner:
1. Splitting cost of monthly marketing budget 50/50.
2. Fielding calls, setting up appointments, negotiating, closing deals.
Lender · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
10y
It's a matter of preference and value proposition...my preference is that if I am the 100% money guy, I am not going to take less than 60% of the money share. That's just me. Most of my personal deals like this one are 75%/25% with me getting the 75% as the money partner. You have all the financial risk and the liability risk...the LLC is distributive to the amount of capital provided by each member.
Agent/Investor · Murphy, TX · Member since 2013 · 542 posts · 304 votes
10y
Are you putting up 100% of the cash or 20% and getting a loan for the rest? Why can't your partner just go get a hard money loan and replace your 50% with 10%-12%? To make that deal look fair to me, you should pick up all the marketing/DM responsibilities, answer some of the calls, and deal with the realtor on the sales side. None of those tasks are location dependent. Right now, it looks to me like his end of the stick is pretty short.
ETA: By picking up the marketing responsibilities, I meant from a work perspective, not expenses. Splitting those costs makes perfect sense.
Lender · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
10y
It's a matter of preference and value proposition...my preference is that if I am the 100% money guy, I am not going to take less than 60% of the money share. That's just me. Most of my personal deals like this one are 75%/25% with me getting the 75% as the money partner. You have all the financial risk and the liability risk...the LLC is distributive to the amount of capital provided by each member.
Rental Property Investor · Dearborn, MI · Member since 2015 · 177 posts · 48 votes
10y
@Charlie Fitzgerald I think you're right, it comes down to preference and how comfortable an individual is with the risk involved. For our situation, I feel that he's got his work cut out and the value of that seems closer to 50/50 than 75/25. Thanks for your response!
My partner and I are setting out on a flipping/direct-mail campaign. I am out of the country which leaves my partner in the "boots on the ground" position. Just trying to figure out a fair value of that work compared with the risk of me putting up all the funding.
What are your opinions of a 50/50 profit split based on the following partnership structure?
Me:
1. Splitting cost of monthly marketing budget 50/50.
2. Putting up the funds for the deal. (20% of purchase price & rehab, plus closing/carrying costs.)
3. Helping with the marketing/direct-mail campaign.
Partner:
1. Splitting cost of monthly marketing budget 50/50.
2. Fielding calls, setting up appointments, negotiating, closing deals.
3. Managing rehab and sale.
4. Helping with marketing/direct-mail campaign.
Any advice or criticism is welcome! Thanks!
What ever you guys agree on. Get it in writing, and have a lawyer draw it up. Many a deals have gone wrong on hand shakes only. Contracts , and defined roles in partnership structure.
Make sure every little detailed is covered.
Have an escape clause if some thing should go wrong. ( like taking the property back )
I lost many deals , and friends ( investors ) because items were not clearly defined on who was doing what. When things are great and propertie are moving. We all seem to forget the little details . So when things go wrong , and S## iit hits the fan. That's when having clear precise details. Spelling out everything, as well as exit strategies.
I had some good contracts drawn up by lawyers, and one by accountant if you would like to see them .
Rental Property Investor · Dearborn, MI · Member since 2015 · 177 posts · 48 votes
10y
@Alex Franks I would love to see those if you don't mind. I don't want to breeze through setting this up and skip things because I don't think they would happen.