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Updated almost 4 years ago on . Most recent reply

User Stats

41
Posts
31
Votes
Stewart Wyne
  • Rental Property Investor
  • Atlanta, GA
31
Votes |
41
Posts

What's an appropriate sweat equity share?

Stewart Wyne
  • Rental Property Investor
  • Atlanta, GA
Posted

Need some advice on partnerships. 

So I've had some success in SFD re investing (2 million portfolio). Now I've got family and peers that want in on the game, but want me to do all the work. Find the deal, close, manage, etc etc. Everything. 

How much equity share is a reasonable amount in sweat equity if I have a silent partner? How is that typically structured?  Can you give me some examples?

Example 1: Say we buy a 500k house, 100k down payment. How much can I ask them to put down if we are going to maintain a 50/50 ownership structure? 70/30? 60/40?  Or What if they are putting up 100% of the financing. What sweat equity is appropriate? 10%?

Example 2: I've thought about doing a large sweat equity share on the back end, or exit. So, we do a 70/30 split on down payment, and we maintain a 70/30 split on cash flow. But once the investor has been made whole (got his 70k back), then it shifts to a 50/50 profit slip. I realize that's probably not till we sell the place, but you get the idea. Would that be reasonable or attractive for an investor? I'm totally self funded so far so not sure whats appropriate.

Most Popular Reply

User Stats

41
Posts
31
Votes
Stewart Wyne
  • Rental Property Investor
  • Atlanta, GA
31
Votes |
41
Posts
Stewart Wyne
  • Rental Property Investor
  • Atlanta, GA
Replied

@maggiedavis I've been totally unsuccessful at finding an equity partner. I actually gave up. My mistake was reaching out to friends (doctors and lawers), who don't understand sweat equity. They want me to do all the work for free. I've been somewhat successful in building a RE portfolio by myself with no partners (over $3mm in assets). But I'm sure I'd be 5x the size if I had an equity partner. 

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