how to split cash flow with investor

Question

my market is in the sub 30k homes.  i have a couple of them and the cash flow is pretty nice to have.  i am considering soliciting investors who are willing to dabble in real estate without being an active investor.  maybe i can become a partner/property manager

considering the following: the investor owns 100 percent of the home...the investor just collects his money.  myself (being the partner) finds the deals to present to the investor, negotiates the deals with seller, manages the properties, meets the contractors, collects the rent etc...

if you can purchase a property for 25k that has a cash flow of 500 per  month, what is the preferred split between investor and partner?   50-50?

Jeff B. · Answer

First, create a document of understanding between the parties.

A tough nut to crack is an open-ended JV like, where members come and go.

Otherwise imo, take the number of members and add (one or two pseudo members for management effort) and members get one-share each, mgr gets his + the pseudo member shares.

Profits each month distributes x 1/shares.

When to distribute?

• Monthly may be too soon as  invoices don't always arrive with the service.
• quarterly might be easier to manage

Mark Limke · Answer

Of course, the ultimate answer is, whatever you both can agree on. Right?

But my thought, in practical terms, is to find out what sort of return on investment the funding party would need to get them interested in choosing you over other alternatives. That depends on your market, to a great extent, such as what kind of cap rates your local investors get.

Good luck with your deals!