I have a question about proportional ownership, equity, appreciation and how to split the cash flow. My business partner and I own a property together with good cash flow. For simplicity, let's say owner A owns a property worth $200K. Owner B joins him with no money down and the note is refinanced with a new 150K loan to be payed off over 10 years. On the day owner B joins, A has 50K of equity and B has zero. During the 10 years that the note is being payed off, I assume the cash flow is split 50/50 right?
As the loan is payed off, each principal payment is split 50/50 between A and B increasing their respective equity equally, right? When the note is payed off, A has 125K of equity and B has 75K of equity if the value of the property has not changed. What if the value of the property has gone up to $300K once the loan is paid off. If the property is sold, is that $300K split 62.5% ($187.5K) to A and 37.5% ($112.5K) to B? Or is the 100K appreciation split 50/50 yielding $175K ($125+ $50) to A and $125K ($75K + $50) to B?
Thanks for the help.
