Joint investment with friends - How do you structure the deal?

[Hari Narayanan]

Hello,

I am looking to do my first BRRRR RE investment and looking for properties in the 1M dollar range (purchase price + rehab cost). There are 2 friends who are interested in investing in the deal. Although I have the cash at hand to do any such deal by myself, I would prefer to do it with my friends to lower the risk.

Both of my friends are out of state. So I will be 'running the show' - identifying the property, hard money loan, contractor selection, rehab work supervision etc. The area where I am looking is 50 miles away - so it will require driving back and forth quite a bit.

I would love to hear suggestions/recommendation for how a deal that's fair to everyone can be structured. One option is we all put in the same amount of money and when we exit, the profit sharing factors in my sweat equity. I was thinking a 80/20 split - meaning we all get 80/3 % of the profit and then I get the remaining 20%. No other fee of any kind.

What if things dont go that well and there is a loss? How should I think about it?

Is that reasonable? Any other deal structure that you have done yourself?

I would love to tap in to BP's collective knowledge pool.

Thanks in advance.