@Gray Karnes This is a great question and discussion. We have been in business for 20 Years offering JV partnerships like what you describe above. We offer 50/50 -profit split as well. Both types of financing have their pros and cons. I will list a few out below.
Lending Pros
- Typically will pay less as its a straight interest rate
Lending Cons
-Sometimes difficult to get 100% funding
- If the property does not make a profit you still owe the lender their rate
-Speed to close is often not as quick as a private lender with cash funds
-Auction finance is not available
Private Lender JV Pros
- The financial risk is predominately the capital partners
- Speed- Can make offers and close in days. Which typically gets a better price
- Can get a line of credit and have immense buying power.
- A partner on your side to analyze deals together as on the same team.
-Auction Capital is a available which is a huge buying channel
Private Lender JV Cons
- You will give the partner more of the profit.
AS an example we offer 50/50 JV Equity funding. After the first few deals we are able to offer Auction funding to our partners. We have a partner in Atlanta that has a $2Million capital line of credit with us and predominately uses it for auction purchases. He does 30+ flips a year and makes over $500k every year for the last 20 years. He doesn't use a penny of his capital or financial risk.
In summary you give more profit up with a JV partner , however you can scale up much higher And quicker with a variety options.
The question you have to ask yourself is “Is it better to have a piece of a larger pie or keep 100% of a smaller slice yourself ?”
Best of luck in all your endeavors.
