Structuring a partnership with my brother

[David West]

What's up BP Community,

I need some advice and would love any feedback you have for my current situation. I live in Southern California, and I have been studying real estate for several years. I bought my own property which I am currently house hacking, but this is the year that I will really start to build my real estate portfolio and start the journey to financial freedom. In addition to having a passion for real estate investing and building relationships, for the past 6 months, I have been working for an investment company that flips SFR's. I meet with agents, introduce myself, and try to get off the market properties that we can buy with cash. The purpose of this little intro is just to let everyone know that I do consider myself a newbie, but I still have some knowledge in putting a deal together and I know what it looks like from start to finish.

I talk to everyone I can about real estate, and the goals that I have. It's really an incredible vehicle to achieve your dreams and I really believe that anyone can succeed with hard work and some clever thinking. Through some of these conversations and my enthusiasm I came across a pretty amazing situation and this is where my question comes in.

Last week my brother called me out of the blue and told me that he wanted me to find a multifamily property that I would manage and he would finance. We have never worked together before but he's seen my passion, he trusts me, he has the capital, and told me that he needs to make an investment this year because he got creamed on his 2016 taxes. He doesn't really have the time or the desire to learn the ins and outs about real estate investing. I have a few questions around the project that I've found, but that may be reserved for another post. My main question here is how do I structure this partnership? I really don't have money to put in for the down payment or any of the rehab that may be needed. The last thing I would want to do is lose an investor's money, but the stakes are even higher when it's my brother. How do I make sure he doesn't feel like he's putting all the skin in the game, and how do I make him feel good about making this investment with me as a partner? I've read a few posts about structuring deals and I'm inclined to pitch the following scenario:

1. Purchase Price of 4 unit property = $1 million

2. Rehab = 50,000

3. Down Payment = 200,000 ( is it necessary to put down 20% or should we find a lowerdown payment product and use the rest for rehab?) 

Partnership Details:

Money = 50%

Acquisition = 25% 

Management = 25%

The down payment would be treated as a 2nd mortgage and would be treated as a 2nd position lien. 

I talked to a property management company who specializes in short term rentals and they say, on average, in the area where I want to purchase, a 2bd 1ba goes for $200 a night and will probably rent out 200 nights a year so that's $160,000 annually. I think PITI would be around $5,000 monthly which leaves $100,000 after the mortgage is paid. From there he would get a payment for the down payment at 8-10% interest then we would split the remainder.

Is this a fair deal, how would you set it up, what am I missing? Thanks for reading, and I would greatly appreciate any feedback.