What is the usual JV partnership split?

[cobando]

Hello,



I have two other business partners who have 30K each to invest and I only have $10K. I'm pretty much okay with spliting up the equity in the same percentage of our capital investment amount. However, I'm the brain of the group and the investment mortgage will be in my personal name since one is still in school and the other one won't qualify for a mortgage.



I would like to know how much more I could charge to compensate me for taking the risk putting it in my name and for doing 80% of the legwork, including rental management and finding a quality realtor and a mortgage broker to work with us?



Just wanted to know what people in this situation would normally do? What is the norm? I don't want turn them off though since they are good friends of mine.





P.S.



We will have legal contracts in place etc...

just don't know what the split should be...



Any help would be great!





Thanks,



Cathy

facebook.com/23YOL

 

[bizaro86]

Do you have a track record that you can point at as proof of how you're going to add value?



Either way though, you putting your name on the line for the mortgage is worth something. If this is your first deal, it might be worth going as low as 1/3 per partner, but it's hard to say without knowing your situation precisely. Obviously if you can negotiate a bigger share that would be in your favour.



Michael

 

[Sherilynn]

I'd have it as a 50/50 split even with the co-venturers providing all of the money.



Do NOT undervalue your time, energy, and expertise, not to mention the extra risk of having the mortgage in your name only.



If you make a list of all of the things you have done and will do to set up and maintain the investment, and compare it side by side with the co-venturer's duties (i.e. bring money), you will likely find no objection to a much more equitable split.



Plus, if you have an ROI projection to show the co-venturer what he could be making on his money even with a 50/50 split (or 60/40, or whatever you decide) he should be thrilled.



FYI, I have adjusted my splits on occasion. Since the workload is the same for a $600k single family property as it is for a $200k, I am willing to consider other options. However, this is normally to give my lease-option clients a better deal rather than to give my co-venturer an even better ROI.

 

[Thomas Beyer]

[quote user=cobando]

I have two other business partners who have 30K each to invest and I only have $10K. I'm pretty much okay with spliting up the equity in the same percentage of our capital investment amount. However, I'm the brain of the group and the investment mortgage will be in my personal name since one is still in school and the other one won't qualify for a mortgage.


try this:



Money portion: 50-60%

Work: 20-30%

Mortgage qualification: 10-20%

plus a 10%% management fee of rent collected if self managed, or 5% if property manager managed.



so in your case: 50% for you with 10K in .. 25% each for the other 2 guys each sounds about right ! My blog has a post of what you'd do for the 20-30% .. 25+ action items that you should gt compensated for. As stated in another post, don't undersell yourself !

 

[housingrental]

Sounds like a great way to underfund an investment and have too many owners

I'd wait until you have more funds available before taking action

 

[JoeRagona]

Adam has a good point. Some advice I can give you is "avoid more chaos in your life" - when investors come to me to help them grow their business which INCLUDES helping them learn to attract JVs, the FIRST thing I tell them is "who is your ideal JV partner?" What do they LOOK like? I have found that when investors (I was one of 'em) go after the money first and the partner second, it creates havoc.



Plus, depending on your 'business' experience, you'll want to have less, not more partners ... per deal ... or in TOTAL.



Just some thoughts.

 

[TonyMandrique]

I limit my partners to five for lesser havoc and keep 50/50 splits.