Hello all. Curious thoughts on joint venture structure and why the money partner would ever give up equity instead of just using a good property management company.
I've run numbers on proposals for a 50/50 JV where the money partner puts up the down payment and initial improvement costs as well as takes title on the mortgage. The other partner handles all property and tenant matters. They then split operating profits 50/50. On sale, the money partner gets their initial investment back and remaining capital gain is split 50/50.
I value property management very much but in a 50/50 the money partner seems to give up a lot of equity for management and has all the downside risk as their capital is tied up and they are tethered to the mortgage.
Am I missing anything here in my thought process?
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I've run numbers on proposals for a 50/50 JV where the money partner puts up the down payment and initial improvement costs as well as takes title on the mortgage. The other partner handles all property and tenant matters. They then split operating profits 50/50. On sale, the money partner gets their initial investment back and remaining capital gain is split 50/50.
I value property management very much but in a 50/50 the money partner seems to give up a lot of equity for management and has all the downside risk as their capital is tied up and they are tethered to the mortgage.
Am I missing anything here in my thought process?
Sent from my SM-G925W8 using myREINspace mobile app