What's His Cut? What's mine? 60/40? 70/30? Or, is it 50/50?

[Scott S.]

I'm on the fence about outsourcing my property management to a company. Why? Because there's a lot that I'm willing to do and a lot that I feel capable of and comfortable with doing. However, there are things that I either don't feel capable of and other things that I just don't want to do.

My friend is willing and able to shore up these areas for me, but what should the split be? I recognize that I could just pay him to do a job from time to time, but I want to develop a longer-term relationship with him and have him be a part of future projects. I also want to help him begin his journey into real estate investing.

I would be the one investing 100% of the capital for now. He would be investing his labor. What's that worth? On the one hand, I'm the one taking the risk, so I can justify the split being in my favor. On the other hand, he's the one who will be putting in the sweat equity, so I can justify the split being in his favor.

As investors, when we put our money at risk (real estate, stocks, etc.), we have certain expectations of how much return we want. If I'm getting 20% on my money, I'm more than happy. I'm pretty happy with anything that beats the S&P, if I'm being honest. But, that doesn't mean his work is necessarily worth the balance.

How would I calculate such an arrangement? Has anyone done this successfully before? I'd love to learn about what worked and what failed.