I need help on how to structure a partnership on a rehab and sell deal with two partners please. Using the following basic assumptions:
Partner A: $ contributor, bookkeeper, general advice
Partner B: project manager
Purchase price: 140,000
Sales price: 260,000
Partner A: $60,000 out of pocket in expenses
Partner B: 650 hours of time invested
Can anyone tell me what the payback and profit sharing equation would look like? Thanks
what was the agreement prior to closing I know he did not lend out 60k and have no idea what he was going to make on the deal!!
It’s a long story, but basically the plan was Partner A would pay all the money (est 60k) and Partner B would do all the work (est 6mos) and they would split profit 50/50. Now Partner B feels they have way too many hours in it and the deal is no longer fair. In good faith Partner A is trying to make the deal “fair” but not sure how to formulate the equation. Just not sure how a typical deal would work (not that any deal is ever typical).
Any thoughts/suggestions would be appreciated.
If partner B agreed to split 50/50 but had to spend 650 hours to get his $60K, then it is what it is…he should have put up the cash and let partner A do the hours…but, I’m guessing he had no cash and his credit was "doo-doo…
Partner B made his bed, he should lie in it…
Keith
Is the moral of the story here to make sure you get everything in writing?
Another “spin” on it:
$60K for 650 hours annualizes to $192,00 a year…not bad for a part-time job.
Even Robb doesn’t make that much in his part-time firetruck “gig”!
I say that “Partner B” should ‘shut up and color’…he ought to be begging for some more deals like that to occupy the other 1,430 hours left in the work year! (Hope Partner B is not you, flinvest!)…
Keith
That is only $92.30 an hour that is not bad money I don’t think! You are right! Oh I see the whole picture now bought for 140k selling for 260k with 60 in expenses… So that is only $46.15 per hour… You can make that being a fire truck I think if you were to try really hard!!!
Here is what B did wrong B should of hired c,d,e,f,g,h,i,j,k,l,m,n,o,p,q,r,s,t,u and V to do his work got it done faster and paid them W oh yeah by the way W=$7.00 to $20.00 per hour depending on there experience!
Then A and B would have done less work and got it done faster using c to v and paying w for the work saving money.
Look at the whole picture here if B would have found more houses Which we shall call X and paid out 10k to fix the property and spent his time looking for more deals Y would he complain he would have another 20k coming in this month!
Final thought we shall call it Z and Z=Buy more work less make more!
Thank you all for your input and words of wisdom…I just discovered this board last night and I can see it is going to be an invaluable source!
REO - you are absolutely correct about hiring c-v. That is what A originally suggested. B was trying to be the hero and eventually recognized the error in that approach.
Basically every partnership rule was broken…many lessons learned.
All of that said, A recognizes that B took on an unproportional risk in the project (if the house sold for 200,000 then A would get back the 60,000 but B would be out all of the hours.) So A is trying to figure out what a “fair” deal would have been (shared risk and profit).