New Partnership Structure Advice

[Adam Anderson]

I have been investing in real estate on an off for more than 12 years and become much more active in the last year. A former co-worker as well as an acquaintance recently approached me about partnering up on some deals. I don't really need a partner but am considering it as a way to build my portfolio faster. Both these individuals have the same longer term vision of building a portfolio of rental properties and can both bring additional capital to the table but have no experience with REI. If we partner on a deal, I would work with each on a separate partnership rather than the 3 of us on 1 deal.

We discussed both investing the same amount of capital in an LLC but I will retain a larger ownership %. I'm struggling with determining what is the appropriate ownership split. I will be handling the following:

-Property Search and Acquisition

-Managing renovation & sub contractors

-Sourcing and screening tenants

-Ongoing property management

We will be investing in areas I already invest in, have my team assembled in and thoroughly understand, neither potential partner is local. Basically, I will be putting the deals together, managing the projects, and managing the finished rental property. The partner will be bringing 50% of the capital (which we hope to refi most of it back out with the BRRR strategy). I want to be compensated for the additional work and expertise but don't want to be greedy.

Can anyone help here??

[Steve Vaughan]

Sounds like a lender/investor relationship.  If someone is only bringing capital to the table, why split equity and have to answer to them about strategic and operational decisions they know nothing about?  Sounds like a lot to me.  If I wanted to answer to somebody, I'd go back to the cubicle.

Just borrow their money and secure it with other assets if you go this route.

If I were to go through with splitting equity and partnering up for half the money,  I would also charge an acquisition fee of roughly 3% and ongoing management fees.  Charge outright or receive a larger ownership %.

But I'd rather just borrow their money, if at all.  Growing too quickly is one of the primary reasons businesses fail as I'm sure you know @Adam Anderson.