For example if your looking for income now hold more bonds and real estate.The trick is your real estate allocation could be in the form of REITS or actual real estate.  

Though we've yet to sit down and go over a framework of how he wants to invest and structure the partnership, he's implied that he wants to leverage the money he's allocated for real estate investments.

That means he can't allocate the money elsewhere to make a profit off of it.

Originally posted by @Derek Persuit: RUBS is the allocation of a master utility bill (water/sewer, electric, gas, etc.)t o your tenants.

These costs would be charged against the house before profit split.Option #3 is how it is usually done with 'traditional' real estate private equity funds where you can easily arm's length property management fees since there are obvious standard rates when you only own a few assets, etc.Does anyone have any experience with how to allocate and split these operational costs in a medium sized flip fund ($30-50M of equity)?

Current income, net worth, experience, credit score, time to allocate to activity, ...

You allocated $50/month for cap ex and you are out of state???

I decided going forward to allocate a portion of my budget strictly for capex repairs that would typically be covered by a warranty co.Hope this shines some light for you.

You could also fund this with your IRA if you have that.And not to be a pessimist but a 12% cap rate is likely a fantasy # based on no repairs, no management fees, no vacancy or credit loss, no reserve allocation, etc.

Even is an expert on Cost Allocation Studies on rentals to help reduce your taxes.