Structuring a fair split

[Joe Stafford]

I'm curious how people are structuring splits with people who bring deals their way.

Assuming the following scenario; Party A locates and negotiates the deal to purchase property 123 main st. Party B puts up the funds for hard money down payment (Typically 25%) as well as all funds required to complete rehab and holding costs. Party A and B share in the management of the rehab (contractors, choosing finishes etc.)

All expenses (Purchase, Holding, Rehab Etc.) get paid back to Party B and then the remaining sale proceeds (profit) get split X% to party A and X% to party B?

Thoughts?

[J Scott]

In my opinion,  funding is worth  50% and effort is worth 50%.  In the situation, Party B is putting up all the money and credit, so Party B is entitled to 50%.  If you assume finding the deal is half the effort and handling the rehab is half the effort, then Party B is also doing 25% of the effort. So, Party B is entitled to 25% of the other 50% as well.

Party B should get 62.5% of the total deal, in my opinion.