How to determine wholesale fee when selling to my business partner?

[John Horner]

So here is the situation.  My business partner and I market together for deals.  We split the marketing costs 50/50.  We split all wholesale profits and recently started doing flips together 50/50.  He has more capital then I do, so probably half of the time he buys the property for himself for a flip or rental from our wholesaling company.  

My question is, what is the best way to determine my wholesale fee in this situation.  At first we tried using the 70% rule minus repairs, and anything under that we would cut in half for my fee.  However, we found that most of our deals were coming in right at that 70% rule.  So if it was at 71%, he could still make say 18% on a flip, but technically my wholesale fee would be zero.

Then we tried using percentage of profit.  So we determined 15% of profit on a deal.  Well of course the first deal that we did this way took 8 months and 50% more money then he had planned.  So my expected profit of $4500 or so turned into $2000 and I still had to wait 8 months to get it, much less then I could have made if we would have wholesaled to an outside cash buyer in the first place.

Usually we just negotiate on what we think it would be and end up in the middle somewhere, but this kind of creates a dynamic of us working AGAINST each other rather then acting as partners.

[Guy Raveh]

I think @JPaul Mills was referring to owning properties together with a partner and @John Horner is referring to wholesaling together which are 2 completely different things. @John Horner I think you have to be a realistic as possible in asking the question: "what would another investor pay for this property" and in other words" if we sold it to another buyer, realistically what would be the acceptable wholesale fee". Once you come to a number, split it in half and that's what your partner needs to pay you. It is fair enough if you can agree on that price. You may even want to consult another buyer that you both respect and ask "at what price would you buy it from us?"