How To Structure A "partnership"
Hello all, I am trying to determine a fair way to structure a series of deals. I am a realtor in Dallas. My friend is a competent contractor. He has a source of funding from his Dad, perhaps $25,000 for starters.
We would like to do some rehabs and take them to the retail market. I will find the deals, his Dad will provide some funds, he will do the work and I will retail the rehabbed home.
His wife and her side of the family are not trustworthy people and because of this, I would like to limit our relationship to a series of deals, rather than a formal partnership so that I am not entangled in their web of intrigue and deceit.
What is a fair way to do this where everyone is properly rewarded for their contributions?
This is a great website for a newbie like myself and I highly appreciate any and all input.
Warren
Warren:
Ask your RE Atty. to arrange a Joint-Venture(LLC) for each deal...
This way after
- All costs are paid,
- All work is completed and
- The property is SOLD
You individually take your profits and go on your merry ways (or onto the next deal if you choose).
Keep it QUIET---and make a CLAUSE in the JV Contract with your friend that HE IS NEVER TO REVEAL SPECIFIC DETAILS of your TRANSACTION(s)
Further Keep it deal by deal and DON'T take on any other family members nor partners. (PERIOD)!!!
If you do, or he does, his WIF(no E b/c it =NO ENJOYMENT for YOU) and/or her untrustworthy family get the Idea that your RE deals = a PIGGY BANK for them...you can bet you'lll wish they hadn't become part of the transaction.
Watch yourself and talk over your plans with a competent RE ATTY.
Best to you and your buddy!
Derrick
Great advice, Derrick. The confidentiality clause is an especially good idea. If he wasn't such a good friend, I probably wouldn't even bother but I am tired of seeing him fall off ladders (literally) while working for peanuts for someone else.
I would think a RE atty could structure the paperwork once and we could use the same format for subsequent deals?
What do you think is a fair and logical way to split the profits? The moneyman's role and my finding and selling seem like fairly static endeavors but the extent of necessary rennovation will vary so much from house to house that I haven't yet thought of a way to account for it as a percent of profit.
We're not wanting to beat each other up. I just need a sustainable and fair profit for everyone so that we all are motivated to continue our respective duties on another deal.
Thanks again for your input!
Best,
Warren
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