Investor splits (how to divide who has what share)

[Charlie McVan]

We are investing in a one parcel, 2 home property (Cleveland) and wanted some feedback on how, in fairness to split investment. Here is the scenario, my parents are putting up down payment and closing costs, my wife and I will live in one house and rent the other. We will be responsible for getting the other housed leased and all payments on mortgage. Our thought was to take the entire back house rent $1000 (easy for number comparison) take $500 and put it towards housing savings, $250 parents cut, $250 my cut. But now that I am thinking through that it doesn't make that much sense. Ha.

The point is: we want to equal their investment, and then move forward as equals, however they put up the downpayment and closing, we are paying the mortgage, landlording, upkeep, etc.

Any thoughts? Thanks!

[Matt Motil]

You could always structure it similar to larger multi-investor deals where expenses and reserves are paid up front and then the profits are split up based on the investor split or percentage. You are the one "managing" everything, so you would be the general partner and your parents are the investors for their contribution in the deal. I've seen pretty much any kind of split, but a 20% cut for the general partner and 80% for investor is common, in my opinion. 

If you have any questions about how these kinds of things are put together or more details on splits, etc, just send me a message.