Buying a Cashflowing Rental property with a Partner amid COVID-19

[Russ Marlborough]

What percentage of a deal is fair for me to ask for when I bring a good cash flowing deal to the table? The deal is a 6 unit that makes $275 CASH FLOW per unit per month.

I have partnered with someone to buy real estate for multiple reasons, one being I am financially tapped out loan wise.

We never discussed a percentage each partner will get for what they are bringing to the table. My partner is an out of town investor with deeper pockets than mine. We own two units together currently and split the first deal 50/50. I found both deals driving for dollars and fostered the relationship and did the negotiating for both deals in a market that is difficult to find cash flowing rental properties. I am not sure what to ask for as a cut of the deal but I know from listening to BP that the work I have done is worth something. Once purchased I will also be the boots on the ground/ property manager. Any rule of thumb for what I should ask for percentage wise when I'm bringing two sides of the "deal delta" to the table (Hustle, Knowledge) and my partner is bringing 100% of the financing. 

I am going to be expected to forgo my property management fee if the covid-19 causes tenants to have trouble paying rent with the understanding I am a partial owner of the property. The money I make property managing is supposed to be recycled back into the deal till I meet 50% ownership, But if i am having to manage for free during this pandemic it will severely deter the funds i have to invest back into the deal.

Really need some guidance on how to structure a partnership in this property. I want this to be a win for both of us.

Thanks for the Help!

[Matt Hurley]

Recommendation #1, get an operating agreement and and LLC quick. This is not the time to rely on handshake agreements with so much change in the air. I've structured similar deals (though not multi-units) for myself and a partner, being in a similar position as you. I'm the boots on the ground, I find and structured the deals, walk the properties, write up the offers and communicate with our agent, my money partner and I split 50/50. Some initial thoughts:

• Property management and acquisition are two different things. You should get paid as a property manager no matter what the partnership entails. Whatever percentage you decide is fair, you get paid for it. Just as if you had a 3rd party property management company.
• Your income as a property manager should not be used to "pay back" your portion of the 50%. Your 50% is awarded to you by your contribution as boots on the ground in the acquisition of the property. By taking all the operational headaches off the plate of your money partner, you earn this percentage.
• COVID-19: The biggest question right now is, can you get contractors to work? Florida (as of midnight tonight) is matching the rest of the US by initiating a stay at home procedure. You can't flip apartments with this order in effect. You can maintain them, and make necessary repairs to already tenanted apartments, but not actively rehab or improve. What's your plan here?