Can a partnership increase net profit?

[Danny Day]

What are your thoughts on a partnership agreement for rehabbing / selling? More so I'm talking specifically about silent partners, who want to take a profit but not do any work.

How would you structure this agreement?

I've had someone who wants to take on a partnership with me on a 50/50 split, and wants to split costs 50/50 - but he is out of state, and would not control rehab. I would be in charge of locating, inspecting, closing, rehabbing, selling the property.

Not sure if this is the best arrangement on 1 deal. Could there be a benefit to scale?

Thanks in advance

[Michael Lauther]

Danny, There are many ways a partnership can and will increase your profit but this arrangement is not one of them.

If you increase your ability to do more deals and have an equitable distribution of responsibility than a 50-50 split would make sense.
In this case however you are short changing yourself unless you are compensated for your work before you establish profit.

what constitutes profit in this case will make all the difference. The fact that you are on site in addition to managing the rehab is also a benefit that should be considered when determining profit.

I would consider the partnership as if your financial contribution is rewarded by success of the venture but your management of the venture is rewarded as expense prior to determining profit.