Partner's money / my sweat - What is fair split of return?? - Posted by Dale Mitchell

Posted by djk on December 10, 1999 at 21:12:53:

Another way to pay investors back is to pay back on the amount you profit. Say one investor gives(invests) you $2000. Another investor gives(invests)$5000. You buy the place for $40000 and sell for $60000 after rehab.you pay them back the same profit margin that you made if you want or you can change this to be a percentage. so the 1st investor would receive$3000 back and the second investor would receive $7500 back.Its a pretty sweet dealfor everyone, noone feels like they are being ripped off and it works well with rehabs and flips because it can be quick money.

Partner’s money / my sweat - What is fair split of return?? - Posted by Dale Mitchell

Posted by Dale Mitchell on December 10, 1999 at 11:26:28:

I recently bought a house from an in-law’s estate, did all the work to refurb and sold for great profit. I paid a bunch of bills with the cash(minus Uncle Sam’s share!) so I could get ahead financially. I am now extremely eager to buy another and I have two potential big $$ investors. What is a fair deal if I find the property and do all of the work and they simply supply the funding? It seems that it would be hard to give up half when I’m doing all the work although I understand that they will be taking the financial risk…

Is this a standard deal???..
Any opinions??

Thanks!

Re: Partner’s money / my sweat - What is fair split of return?? - Posted by Bud Branstetter

Posted by Bud Branstetter on December 10, 1999 at 12:35:26:

I like the participatory loan concept. I own and give them a note secured by a deed of trust. The note can guarantee them a minimum interest rate 10-15% plus a portion of the profits. How much is for them to answer. You may offer to much. They may be satisfied with less than what you suggest. If they are your only source for money for the deal you will be more likely to concede more. Find out what hard money lenders charge in your area.

Re: Partner’s money / my sweat - What is fair split of return?? - Posted by Dale

Posted by Dale on December 10, 1999 at 12:57:47:

We plan on flipping the property(ies) within a month or two. The interest return will be small for each deal so they indeed want a cut of the profits. The big question is ‘how much is too much’ for me to give? One of them quoted 50% for the first couple of deals. I know it is up to me but I would like to know what experiences others have had.
Thanks very much, Bud. I appreciate your response!

Re: Partner’s money / my sweat - What is fair split of return?? - Posted by Bud Branstetter

Posted by Bud Branstetter on December 10, 1999 at 22:23:47:

Let’s say you borrowed 50K to purchase and do fix up. A hard money lender may want 15% and 10 points. For 6 months that would be $8750 in financing costs. If you net $20K after the sale. Then going with a hard money lender would be cheaper than half the profits. Calculate it for Statewide that does 12 1/2% and 2 1/2 points. You can give away any amount of the profit you want. Wouldn’t it be nice to do a couple deals in the Roth IRA so you didn’t need to pay others for your short term money.