If that's how you are going to contribute your 1/2 to the investment then I see no problem with it. If you run over your 1/2 then you will both have to contribute equally to the additional expenses.

Just make sure the arrangement is well planned and includes an operating agreement to detail the roles and responsibilities, capital contributions, and profit splits.

 

I can only assume you will be equal partners?

Also, how much paperwork is involved? 60 to 70K worth?

Maybe I'm just not grasping it.

 

He isn't just shuffling paperwork, he found the property, bought it, arranged for financing, and found you.

 

Hold the phone. He has secured the loan, but has he contributed any cash?

You are contributing 70k of value to an equal partnership in an asset. Is he contributing an equal amount of value?

 

That's how I feel. The property has great potential and I stand to do well in the future. it just doesn't seem like an equall deal

 

Have him pay you like any other client. Have a draw schedule. You make your money on the work, he makes his money when the property is sold.

At the very least you should be well versed in executing mechanics liens.

Youll need a partnership agreement. Of all business entities partnership fail the most. How will you resolve disagreements wjen you both have one vote?

What happens when the the home sells for less than the after repair value? Who eats the loss? Who determines what the profit is? Who keeps the books?
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IMHO, most of the time, when people propose a partnership, they are looking for a sucker for the other side.

 

This sounds so familiar. At least once a year someone wants to partner with me in some sort of real estate deal.

In every case, I have something to bring to the table, but they don't have anything I need.

I'm not saying this is a bad deal, for you. I don't know any specifics. I know of a partnership where one of the partners only handled the paperwork. He didn't invest any money. The partnership worked. Of course there were over 100 units, so shuffling paperwork, for about 15 years, was a significant contribution.

 

I am not sure why he would cut you any for any profit. He has the property and has secured financing for the improvements. Why not just hire out the work?

If you knew what he was proposing from the get go, and also knew that you wouldn't be allowed back in, why did you not do a thorough inspection? You could have maybe brought along a sub or two to give an idea of the parts you weren't comfortable with. Like some have already said, I would generally give a range based on prior work. In your case, at 22, you likely have not been involved with enough work to give an accurate range.

 

I know a doctor who created a partnership with an acquaintance (developed into a working friendship) over the years on multiple properties. It kind of went like this:

Doc put up the money and held the books, but it was still co-owned with the partner and the books were open to both of them. The other guy contributed "on-site" time (with tenants, coordinating subs, troubleshooting, emergency repairs, etc). His own "direct labor" (eg. labor to change locks or whatever) was reimbursed and settled up on a weekly or bimonthy basis, as needed. These tended to be weekend meetings, on the side of their own careers.

That partnership was a winner, but it was based on trust and frequent, honest contact. It helped to pay for many college tuitions and a vacation property or two. Saturday meetings to cut a check and hand over receipts, etc., were routine.

For later properties, there was probably some skin in the game from the second partner, so they adjusted as needed on a property-by-property basis.