Structuring a Partnership

[Mark Wurtemberg]

I am thinking about going in on a deal that I found with a partner. Of course we would do a PA and cross "Ts" and dot "Is". Here are the terms:

• I put 10% cash down 
• Partner puts 10% down
• Partner obtains loan for balance 80% (because my credit stinks, darn student loans)

• Partner states that under this circumstance he would own 90% and myself 10% as he would have the note 80% plus 10% down. Should he die he doesn't want to leave that burden on his wife. Or if I skipped town that he would be left with the loan of the 80% burden. 

I kinda get his point, however, I feel this is no good for me. Very bad ROI. Even if we made $1000 net per month, that is only $100 to me. In this deal we are coming in with $32,000 each. My return of $1200 a year on $32,000 is below 4%.

I have heard many podcasts with @Brandon Turner & @David Greene. And in these podcasts I have heard more often than not if partner one comes in with the deal and partner two has the money (loan or not) that they split the deal 50/50. Am I wrong? 

My question is: How do I effectively go back to my partner and explain that this is not good for me, explain I need this to be 50/50 as we are coming in with the same amount of cash, and that there are ways to make sure his loan is covered should he or I exit from the deal prematurely?

Thank you. -Mark 

[George W.]

It's a bad investment if only owning 10%. Tell him it needs to be 50/50 or it is not happening, he doesn't have the other half of the down payment to buy it himself. You're supplying half of the money to get the loan. He doesn't need to be the only one on the note. Why would you risk half of a down payment for him having 90%? Don't be afraid to ask for 50%. If he can't negotiate any better than you are better off working with someone less greedy.