•Are they typically given a percentage of the cash flow along with interest on their initial contribution?

When I was looking to find a property management company to rent out my own house I wasn't getting enough value for the money IMO and I would've loved if they offered an option where they only took care of maintenance and charged a lower percentage.

Some investors may use different percentages based on their risk tolerance and market knowledge.

They need to be reasonably sure that the deal will close.I've seen a lot of sellers who have moved out of their house or made purchases based on the money they would be getting just to find out a day before closing that it wasn't going to happen.That metric, percentage closed, is relevant, but only over a year or more.

Backup Withholding: If a contractor fails to provide a TIN or gives you an incorrect TIN, you may be required to withhold a percentage of their payment for federal taxes (known as backup withholding) and remit it to the IRS.Following these steps will ensure you are in compliance with IRS regulations and avoid potential penalties.

Essentially, the cap rate is the proportion of Net Operating Income (NOI) to the property's value or selling price:Cap Rate = Net Operating Income (NOI)/Property ValueThis ratio offers a direct method to evaluate the yield a property generates in relation to its cost.For advanced real estate investors, integrating additional factors might prove beneficial:Vacancy rate: The duration the property remains vacant.Operating expenses percentage: Includes insurance, utilities, and maintenance costs (excludes mortgage payments, depreciation, or income taxes).The adjusted formula for net income, incorporating these considerations, is:Net Income=(100 − Operating Expenses %) ×(100 − Vacancy Rate %) × Gross Income

And still the values are as you say higher than reality a large percentage of the time.  

Below is a comparison of average annual property insurance and property taxes for 5 states:Texas: average insurance: $2,536, property tax percentage of value: 1.68%New York: average insurance: $1,418, property tax percentage of value: 1.40%California: average insurance: $1,839, property tax percentage of value: 0.75%Nevada: average insurance: $1,144, property tax percentage of value: 0.59%Florida: average insurance: $2,207, property tax percentage of value: .91%To put these costs into perspective, below is a comparison of the annual cost for a $400,000 property.Texas: $2,536 + 1.68% x $400,000 ≈ $9,256New York: $1,418 + 1.40% x $400,000 ≈ $7,018California: $1,839 + .75% x $400,000 ≈ $4,839Nevada: $1,144 + .59% x $400,000 ≈ $3,504Florida: $2,207 + .91% x $400,000 ≈ $5,847Sources: Homeowners insurance, state average property taxesIndirect costs: Rent control is a hidden tax that may limit your ability to select the best tenant, remove a non-performing tenant, and increase rents enough to compensate for inflation.

You can structure a price for them to pay now, or get an appraisal done at the time of balloon payment and they owe you a percentage.

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