Partnership Structure, need guidance

[Stephen Lyster]

Working out a deal for a 50+ unit apartment complex. Trying to get creative to own myself. However, I have someone that wants to partner. Anyone have any guidance to share regarding one partner putting up the downpayment and the other managing. Guidelines to percentage breakdowns before managing partners 50% of downpayment is repaid?

[Michael Ealy]

Originally posted by @Stephen Lyster:

Working out a deal for a 50+ unit apartment complex. Trying to get creative to own myself. However, I have someone that wants to partner. Anyone have any guidance to share regarding one partner putting up the downpayment and the other managing. Guidelines to percentage breakdowns before managing partners 50% of downpayment is repaid?

 Stephen, there are many ways to structure the partnership depending on his/her goals and yours...and what each of you will contribute to the partnership.

If your partner is totally passive, then you can give him a preferred return on the money he/she invested plus a percentage of the equity. For example, you can give him a 6% return on your cash investor's money and an additional 30% of the equity - which means, he/she gets 30% of the cashflow after paying the 6% pref and 30% of the profit when the building is sold.

In this way, your partner gets paid first for investing the money and you're incentivized to make the property cashflow higher than the 6%  - because otherwise, you will not get paid. Higher cashflow also means, higher value and higher profit when you sell. So the above structure aligns your interest with your partner's.

Makes sense?