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Updated over 3 years ago,
What's an appropriate sweat equity share?
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.