JV BRRRR Equity Split

[Cary Hawkins]

Hi!

I am starting a Joint Venture BRRRR with a family member in the San Diego area. I will be bringing 5-10% of the equity in the deal, and the family member will bring the other 90-95% of the equity. I will be fully acting as the GP and managing all aspects of the BRRRR. I want to structure it as an equity split. Does anyone have any good advice on how to do this? Should I get another 5% at each stage of the BRRRR? How much should I end up with?

Does anyone have any advice on how to structure this? If there are other resources via articles/posts/podcasts you recommend, I will also take those.

Thanks!

[Tanner Crawley]

It depends on how savvy your partner is. Typically if you want to take outsized returns the LP wants a preferred return of 8-12% to be paid back before any distributions to yourself. Next should come distributions until your initial capital is paid back + that 8-12% return. 

Then you would typically get 15-20% of the returns above that 8-12% in addition to the returns earned on your own equity going forward.