All Forum Posts by: Ryan Rogala

@Will Barnard agreed. Wanted to come prepared when discussing the partnership/profit splitting ratio. I got background on that and more.

@Michael Krupp thanks for the info. Definitely some food for thought. I haven’t gone any further in discussion with him yet than simply his minimum $$ requirement for a partner. Looks like step one is asking myself how much involvement I truly have the stomach for both now and in the future. Then step two is sitting with him to see what he is looking for from a partner and negotiating a common ground from there.

@Ernesto Hernandez thanks for the info. Good to know the “floor” for any of my returns if I decide to be hands off.

@Aaron Pfeffer this is great info! I appreciate you outlining multiple scenarios. I will most definitely be working with a real estate lawyer to draft a contract for this partnership or to vet the contract my partner provides. I’ll be writing down the items you mentioned to ask when vetting lawyers to work with. Thanks again.

@Eric Michaels thanks for the reply. I do plan to be more hands on actually. Since I’m looking to learn and potentially use this as a stepping stone into my own flips. So I intend to make visits to the site and be clued in on decisions and costs. I also mentioned getting my own hands dirty on the rehab if it can reduce contractor costs and increase profit.

I definitely appreciate the warning though. I don’t anticipate any shady dealings, but it’s better to be paying attention to everything rather than blindly trusting.

@Colton Fairchild thanks for the reply, you’ve got me thinking this thru a lot more. I’m anticipating he would use a traditional mortgage to purchase the house. Assuming this and a purchase price around $200k, that means he’d probably have to come in with cash as well (since my 20k wouldn’t even cover the full 20% down payment). Let’s say he matches my 20k to get the down payment of 40k and then he pulls a home equity loan to cover the rehab expenses. ( ignoring other fees to keep math easy)

On cash alone, it’s already 50/50 but since he’s putting his name to the loans ( taking on liability albeit not to the same degree as hard cash) and is also leading the project execution he’d have a more than fair argument to expect a majority of the profit. Maybe 60/40 or 70/30 etc.

I guess I’m just trying to figure out how much each type of contribution (money, knowledge, hustle, etc. ) is weighted so I can gauge my fair “chunk of the pie”.

The over arching takeaway I’m getting is that there is in fact potential for closer to a 50/50 split when acting more so as just a cash investor (depending on what else the other investor is committing to the project).

I am considering investing with a friend who actively flips single family homes. He states that he would look for a minimum of $20,000 investment in order to take on a partner. As I am new to the industry and working with him as a partner, I’m looking to come in low at $20k-25k. He is a part time realtor and has all of the connections (contractors, lender, etc.) and would organize the execution of the flip. I’m very handy and am offering to chip in wherever needed to reduce contractor costs alongside him.

What type of profit split would you consider fair in this scenario? (50/50, 30/70, 15/85 etc.).

I’m assuming this is contingent on price of properties. Have not looked into available deals for purchase, but homes in our target market that were recently flipped tend to sell in the $250-300k range.

Before starting to browse this community, I assumed it’d be a ratio of my portion of the purchase price ie. 20k/150k= 13% Since that would be proportional to my share of the cash liability on the flip investment. However, after reading more about how you can flip properties with little to no money down through other borrowing avenues my potential partner may have very little cash tied up in the flip himself. Does that mean I am in a position for a larger percentage?

If I am way off base please tell me. Just figured it was a question worth asking now so I’m not kicking myself when I find out I left money on the table later.