Suggestions for % Split on Fixer-Upper (Investor & Contractor)

[Paul Paquin]

I am an investor (and businessman) who recently found an excellent property to buy, fix up and sell. I brought the deal to my contractor friend (and family member) and asked if he wanted to go in 50/50. He's willing to invest 50% of everything and do the work to fix up the property (which could take 60 days of his time) so that we could sell it and profit around $100,000 to split. The other day he hinted to me "since I would be the one doing the work and investing 50%, shouldn't I get a higher percentage?" I mentioned in return, "but it's a deal I found and brought to you, and without me, you could not afford to do this. Keep in mind, my company could fund the entire deal and pay a contractor to do all the work without any financial help, but I am hoping to give this family member a chance to participate in this deal (that could result in more deals). I feel if I require him to put in 50% of the capital that will ensure his skin is in the game and I can count on him to get everything done fast. 

What's fair here?

I could offer: 

Since you are doing the work I'll fund 75% of the investment (less money out of your pocket) and we could then split the profit 50/50. 

Or, I could offer to reimburse him for his time based on a fair hourly rate that he charges for a renovation job of this size, so at the time we sell his hourly rate would be treated as an expense and get reimbursed to him right away.

[Greg Dickerson]

@Paul Paquin First off its very generous of you to bring in a family member and hand them the opportunity to make $50k.

That being said You should definitely compensate your contractor partner for the work he is doing. If you did the deal on your own you would have to hire a contractor and pay them so that is completely fair. 

That way if he’s putting in half the money and you’re putting in half the money it will be a fair and equitable arrangement for all parties.

I would also reduce everything to writing including the worst case scenario in the event something goes badly so that there are no disagreements or misunderstandings moving forward. Doing business with family can be difficult so the more you out in writing up front the better chances are for a successful outcome.