Equity split between passive owner and experienced developer

[John Bauer]

I own a 2-fam property in Brighton, MA that has some extra land that can be developed. Both units are rented and cash flowing. I'm going to be working with a developer I know who has a lot of experience to go through the zoning board and permitting for the vacant land. I no longer live in the area so he will be doing all the legwork and driving the project forward in addition to bringing his wealth of experience and contacts to bear.

His preliminary research suggests that we would likely be able to get approval for 4-6 townhouses on the vacant land and will probably subdivide it from the existing 2-family. Hard to say where the market will be at a year from now, but the fully permitted project could maybe be sold for around 200k per door, conservatively.

We will split the attorney, architect, and permitting costs. I will continue to own the property throughout.

What is a fair equity split at the sellout?

[Scott E.]

Fair equity split is 50/50.

Upon sale, you get paid back your principal first, he gets paid back his construction costs, and then you split the rest.

Of course all of this should be run through an attorney to get everything outlined in a contract.