Flipper/Rehabber · Member since 2017 · 1 post · 0 votes
If I am flipping a house with a partner...
Question is between the two of us, how to split profit for 80/20 investment plus 50/50 sweat equity.
Option 1:
I’ve heard people say to split entire the profit 80/20 based on how much each person put in.
Option 2:
The other thing I’ve heard is to give back 10% interest (or whatever interest rate agreed on) based on how much each person put in and then split the rest of the profit based on work put in/sweat equity, which in this case would be 50/50.
There are no standards for partnerships like this. Negotiate, come to an agreement that both sides are happy with, and move forward with that. I've done partnerships in probably 50 different ways; as long as both sides are happy, that's all that matters.
I agree with J Scott above, many ways to skin this cat and there are no set standards. The best partnerships are spelled out and when both are happy to start and at the end.
In my opinion, there are 3 major parts to a real estate investment and they are not all equal. The sourcing and negotiation of the deal, the management of the deal, and the funding of it. Figure out which each part is worth to you both and then calculate who gets what % based on what each of you put in. That should make it fair in most cases.