right way working in partnership

[Raj G.]

Hi, 

I am working(Not reality) full time , I want to invest in partnership with some investor(like full time investor).

I can put some efforts like in the evening and weekends

Just wondering what is standard/Conventional way of such partnership.

how much both invest in what percentage and what ratio profit sharing is done.

like one invest 100% and other invest 0% but give 100% effort and then share equally?

it doesn't sound safe because other has not skin in it , so he/she can take it lightly?

so what should be right way of doing this?

[Seth Ferguson]

Hi @Raj G.,

A syndication may be an option for you. This would allow you to participate in larger deals while concentrating on your full time job. The structure also provides protections to the investors, as limited partners. Keep in mind, most syndicators will be working with accredited investors only...I don't know your financial situation. Let me know if you have any questions.

In terms of partnerships, you could be the money partner in a smaller deal. Typically, the money partner provides the downpayment and reno capital, and the other partner brings their experience, knowledge, and management of the project. There are many variations.

[Raj G.]

@Seth Ferguson Thanks for your reply, but I am not interested in syndication because you are passive member and don't learn anything.

Btw in our Hindi slang "Seth" is used for rich people :-)

[Luke Miller]

@Raj G. What are your goals? It's not necessarily true that you don't learn anything in a syndication. Limited Partners have direct access to reports, sponsors, underwriting, etc. Plenty of people have been a limited partner in a syndication and then moved on to complete their own deals.

I would suggest figuring out what you want to do before finding a mentor or partnership. Flipping, rentals, wholesaling, etc. 

[Matthew Paul]

The only way is to have 2 parties agree to the terms on paper . Odds are there will still be problems . 

[Alina Trigub]

@Raj G.

It comes down to what you and your partner agree to. While some agree to 50%/50% split, others may decide to shift it. In terms of the skin in the game, it depends how serious this no money down partner and whether they want to continue working with you down the road.

[Chase Louderback]

@Raj G.

Like @Alina Trigub said there's many ways to do the split or partnership.  Some do 60%/40% favoring the lender.  Some take on more of a hard money lending aspect and get points up front and just interest on their money secured by a lien on the property.  

If the partner having no money down concerns you, you could always ask that they put some skin in the game (if possible).

[Theo Hicks]

If one person brings 100% of the capital and the other person brings 100% of the effort, it is a syndication. If you both bring 50% of the capital and both bring 50% of the effort, it is a JV.

Since you don't have previous real estate experience, it is going to be difficult to raise capital (i.e., syndication). It will also be difficult (but not as difficult as raising money), to attract a partner unless you give up most of the deal. 

You have to think about it from a partners perspective: why would they partner with you? What skills are you bringing to the table? One of those skills can be money, but you said you don't want to passively invest because you won't learn anything (which isn't necessarily true - although you won't learn as much if you did the deal yourself, you will still learn a lot from attending the new deal offering conference call, asking questions about the deal before investing, and reviewing the ongoing updates and financials). So, your best bet is to work on your education, network, and try to do a few smaller deals on your own. Then, you can leverage you education and experience to find a partner.

[Raj G.]

My planned way is 70-30 i.e I invest 70%, other party 30% , I work 30% and other party 70% and share 50-50

[Basit Siddiqi]

@Raj G.

The good thing about partnership's is that the partnership agreement can be structured in anyway that the partner's agree to.

I can understand your point of wanting to put in some work, however, sometimes 1 head is better than 2 heads. 

Does the other investor need to consult with you on every matter?
1) Are you okay with using this paint color
2) Are you okay with using this lender
3) Are you okay with picking this tenant
4) etc

Sometimes, multiple people with management decisions slows down the process.
If you are looking to learn on the deal, you may want to go into a deal and tell the other investor that you simple want to learn. He may ask for a higher rate of return to compensate for teaching/mentoring you.