Zillow Advice: Rentals - Is this a good business decision? http://www.zillow.com/advice-thread/Is-this-a-good-business-decision/449055/ Zillow Advice | Zillow Real Estate "What he is proposing, since ... http://www.zillow.com/advice-thread/Is-this-a-good-business-decision/449055/ <strong><em>"What he is proposing, since he doesn't have the capital, is that I pay the $38,000 up front, and he basically does everything else forever."<br/><br/>"We will not be taking any profits, we are investing it all back in."<br/></em></strong><br/>You're walking into an open-ended financial commitment, and the only thing you've talked about is the "up side". Unless you've fully investigated, and are prepared for, the "down side" - you're setting yourself up.<br/><br/>And, "no, 50/50 is not reasonable since you are taking all the&nbsp;financial risk". Sat, 30 Jun 2012 11:10:00 GMT http://www.zillow.com/advice-thread/Is-this-a-good-business-decision/449055/ 2012-06-30T11:10:00Z If this person was "extremely ... http://www.zillow.com/advice-thread/Is-this-a-good-business-decision/449055/ If this person was "extremely successful in Real Estate," they'd have the capital and wouldn't need yours.<br/><br/> Sat, 30 Jun 2012 04:49:00 GMT http://www.zillow.com/advice-thread/Is-this-a-good-business-decision/449055/ 2012-06-30T04:49:00Z 50/50 doesn't sound fair ... http://www.zillow.com/advice-thread/Is-this-a-good-business-decision/449055/ 50/50 doesn't sound fair if you're putting up all of the cash. I understand you're projecting positive cash flow, but what happens if unforeseen circumstances require additional capital? It sounds like your partner will likely rely on you to cough up the extra change.<br/><br/>I've been on the other side of the equation (structured and managed small apartment buildings while another investor put up the majority of the cash). Even in those cases, however, I didn't expect a 50% equity split.<br/><br/>Be sure to "pad" your projections because unforeseen circumstances are pretty much guaranteed when you own property, especially rental property.<br/><br/>Best of luck and feel free to reach out if you have any follow up questions! Sat, 30 Jun 2012 04:48:00 GMT http://www.zillow.com/advice-thread/Is-this-a-good-business-decision/449055/ 2012-06-30T04:48:00Z We will not be taking any ... http://www.zillow.com/advice-thread/Is-this-a-good-business-decision/449055/ We will not be taking any profits, we are investing it all back in. &nbsp;Thank you for the info, very helpful!!! Keep them coming please! Sat, 30 Jun 2012 03:51:00 GMT http://www.zillow.com/advice-thread/Is-this-a-good-business-decision/449055/ 2012-06-30T03:51:00Z If he does all of the work ... http://www.zillow.com/advice-thread/Is-this-a-good-business-decision/449055/ If he does all of the work and you provide a bit of money to get started everything is up for negotiation. <br/><br/>He could see him doing all of the work so he should deserve more of the profit. His hard work will make this succeed or not.<br/><br/>You can see that you are providing all of the money so you deserve more.<br/><br/>There is no right or wrong answer here. ONLY you 2 can decide how to set this up. You can also decide not to do this if you choose.<br/><br/>Do NOT take the profits and enjoy them. If it was me I would put half of the profits in an account for future repairs that will happen. In fact for the first year I would take no profits so I was well prepared for an unexpected repair. If a repair is needed that takes $5,000 and you have it in an account set up for that reason there is no problem. If each of you took all of the profits each month where would the repair funds come from?<br/><br/>Pay attention to wetdawgs reply below. Sat, 30 Jun 2012 03:43:00 GMT http://www.zillow.com/advice-thread/Is-this-a-good-business-decision/449055/ 2012-06-30T03:43:00Z I would sit down with potential ... http://www.zillow.com/advice-thread/Is-this-a-good-business-decision/449055/ I would sit down with potential partner and bang out a list of expectations.&nbsp; Then, get it in a legal LLP or LLC (whichever you agree on) by meeting with a lawyer.&nbsp; (Don't use one of the forms from the internet).&nbsp;&nbsp; This describes activities you've mentioned in your post, as well as who pays for (or does) repairs, insurance, taxes, how the rental income is split, who does the accounting, what happens if one person wants out, what happens if someone dies, and 100 other little things (as well as whose name is on the title and mortgage), <br/><br/>Then and only then move forward with a purchase offer.&nbsp;&nbsp; Putting a purchase offer in before you've got the LL(whatever) on paper and signed is a good way to end a good friendship.<br/><br/><br/><br/> Sat, 30 Jun 2012 03:30:00 GMT http://www.zillow.com/advice-thread/Is-this-a-good-business-decision/449055/ 2012-06-30T03:30:00Z If "doing everything" means ... http://www.zillow.com/advice-thread/Is-this-a-good-business-decision/449055/ If "doing everything" means picking up the checks, I'd want more. Also, I would want to make sure my investment was protected in so much that I could sell and recoup market value whenever I chose. Lots of questions. Sat, 30 Jun 2012 03:18:00 GMT http://www.zillow.com/advice-thread/Is-this-a-good-business-decision/449055/ 2012-06-30T03:18:00Z