Thoughts about my partnership arrangement

[Ehab Shoukry]

Hi all -

I'm sure there are all sorts of partnership arrangement options but wanted to get your thoughts on this one.  I have a friend who lives in another state that wants to partner on multifamily deals.  He is going to put up the money and I am going to find the deals.

We would be 50/50 partners and the arrangement would be the following:

1. I would find the deals and he would put up the financing for the 20% downpayment.

2. The monthly profit from rental income would be split 50/50 whereby I would use my 50% portion of the profit to pay him back my half of the downpayment.

3. If I chose to manage the properties I would get a management fee for doing that work.

4. Once I've paid back my 50% portion of the inital downpayment, I would actually start getting paid on the investment.

To put it in real numbers, if we bought a $100k property my partner would put up $20k downpayment to buy the property.  If the property makes $10k a year profit, I would pay back my partner my half of the profit ($5k) until I pay him back $10k which is half the downpayment.  At that point, we are both equally invested in the property.  Essentially in this scenario, it would take me two years before I actually got paid on the property.  

I'm interested in what you thought about this arrangement and if others have done things differently.

Thanks,

Ehab