Fair percentage for investor

[Ben Tedla]

Hello BP! Here is my situation and hopefully someone can provide some recommendations on path forward. My brother and i recently purchased couple of multi-family buildings. It’s a value add project so we’re in the middle of renovating several units. A good friend of mine wants to join the project by contributing an equal amount that we spent thus far (1/3 of the down payment; 1/3 of the closing cost etc). Since we found the deal; underwrote the deal; got it under contract; did the due diligence and market research; got a mortgage and successfully close on the deal, it doesn’t make much sense to split the NET rental or NET sale three ways (even thought he’s putting the same $ amount). He doesn’t plan to be a silent partner so his help in various areas of the project will come in handy. Furthermore, we can definitely use his capital to speed up the renovation process and provide more security cushion during this uncertain time. 

This is my first time entertaining such arrangement so would love to hear your thoughts or what is considered a ‘fair’ percentage for this particular scenario. 

[Theresa Harris]

If his capital will speed up the reno, you and your brother will save money in terms of interest.  I'd split everything 1/3.