15% ROI vs 50/50 profit split?

Question

Ok, I would like to get feedback from seasoned investors / rehabbers.  What return do you usually get on your investment or JV?  12% ROI, 15% ROI, or 50/50 profit split?

Bryan C. · Answer

Good info.  Similiar strategy that I would like to do but i am building my capital right now.  What areas are you working for the investor?

Javier Marchena · Answer

I have an investors making money out of the country.

He would like to have an income once he comes back to the US, so he is buying properties that he would hold for a rent income. He is not doing a flip. Just getting distressed propertied for a discount price, fix them and rent them out.

He buys propertied for around 40-50K. He puts 10-15K for repairs and then rent them at $900-$1000/month.

I find the properties, fix them up and get them rent ready at 15% of labor and materials. I cannot use a 50/50 split on this case because there is not going to be sale and it would be hard to put a price to the finished house.

Then, I charge him property management fees for the time he is out of the country. Once he comes back, he will take care of them.

Hope this helps you.

Bryan C. · Answer

@Javier Marchena ,

Explain the "buy & hold" situation again?  Can you use hypothetical example or #s?

Javier Marchena · Answer

It depends on the investors.

For a flipper I go 50/50 split.

For the "buy and hold" investor, I charge 15% of labor and materials to fix the property. Then, property management fee once the property is rent ready.

Bryan C. · Answer

flipping.  investor fronts entire cost while rehabber does all the work.  Once property sells both get paid..depending on the split that is decided (which is why i listed a few options above).

Brian White · Answer

without specifics, its tough to say.  theoretically, if you're splitting profits, then you would also be investing less up front so your ROI might be be the same.  that doesn't sound like the case here though.

what kind investment are we talking about?  flipping?  buy and hold?  time horizon for payback (and length pf partnership) will also be factors.