The above works. Or you could put more emphasis on the cash/credit
side. Granted you want everyone pulling in the same direction.
If there is a deal that goes badly and there is no profit are the losses
shared? If not then more to the cash and credit folks. If there are
shared losses and you can enforce the sharing then maybe the splits
you suggested are fine.
In the end it will also depend on everyone agreeing so any number that
has everyone agree is a start. The next test if do they still agree a few
months later.
I am involved with a team of four REI investors. We were 3 now we will be 4. We are trying to figure out how to split the profits. Right now, one person is suppling the cash and the credit to purchase properties. All four of us find the deals and do an equal amount of “work”.
This is how we split everything when there was three. The supplier of the credit got 33% the supplier of cash 33% and the managers of the deal got the remaining 33% to share equally among the 3. So my cut is 11%.
Anyone of us can be the supplier of cash and then recieve more profit at anytime. Same with supplying credit when needed.
Now with four of us, we are think the credit supplier receives 25% cash supplier 25% and the remaining 50% split equally among the four. (everyone gets a piece of every deal)
Does anyone have any other models for profit sharing/splitting? We want to be fair to the credit / cash supplier but we also want to be paid fairly for our deal making. Any thoughts are greatly appreciated!!
My opinion is that there are already too many partners to make money. I will not partner with more than 1 person at a time. You people must really be lacking something in your investment strategies if you need to lean on so many people?
The other thing that needs to be done before starting anything is to write a thorough partnership agreement that covers everything that possibly could go right but also more important what possibly could go wrong.
Re: Profit sharing with partners. (kinda long) - Posted by michaela-CA
Posted by michaela-CA on June 16, 2007 at 09:59:31:
Shogan,
hm…to me that sounds like very little profit to find a deal. If I found a deal, then I wouldn’t be happy with 25%, let alone 11%. Maybe that’s just me, but I try to avoid at any costs those deals, where I have to have a partner and give away 50% of my share, if they bring cash.
I would think, if you found a good deal, that you wouldn’t hav ea problem finding a partner, who supplied cash & money for 50%.