Structure / Split of a JV with an Angel

Financing, Hard Money Lenders, Private Money
1

I met with a local business owner who has a contact with a lot of money to invest in RE. Will call the contact “Angel”.

Angel wants to do a very large JV in real estate and is thinking 50/50 split. Angel would be silent, invest 100% to buy properties cash, outright, I would be the manager, and we’d split a JV 50/50.

Most of it would be long term rentals, but I’m sure there would be some rehabs as well.

A few questions:

  1. Is 50/50 a good split? I think it is, because the only thing I’d have to invest is time.
  2. What are the drawbacks, cautions, etc?
  3. Are there any good resources for putting together a plan for said JV?

I have 2 SFH rentals currently, but Angel would be interested in 30 SFH or so.

Also, if it worked, Angel would probably want me to find other investors for him to JV with.

Thanks in advance for your feedback.

2

If he is putting in 100% of the money why would he split 50/50? Something is wrong with this picture.

3
  1. He’s out of the country, but wants to buy a lot of SFH.
  2. He has a lot of money to invest, but no time to ‘manage’. I’d be doing everything aside from writing the checks.

After doing more digging around yesterday, 50/50 actually seems reasonable.

4

Before you get your hopes up and waste your time have the money guy to open escrow with some funds and then you know he is serious.

5

Get a partnership agreement IN WRITING.

You need to know exactly who is doing what for whom. Ok, you manage the deals for 50%. What happens when the floor guy wants a check today for the install? Do you write a check and wait for reimbursement? What happens if suddenly he “doesn’t wanna” write that check because his daughter’s having a $40,000 wedding or he’s on a month-long vacation in italy? What happens if he doesn’t pay the mortgage? Is the property in his name only? So it forecloses and now your 50% of the business dries up. Did YOU sign a personal guarantee on the mortgage at the bank because they don’t like having investors from Hondurastan? Who gets sued if he lets the insurance lapse? Him in Venezuelastan? Or you, who managed the hanging of the cabinet that fell and cracked junior’s skull? And what about that lapsed insurance again?

IN WRITING. IN ADVANCE. BY AN ATTORNEY.

another option is he just pays you hourly or a salary for locating/facilitating/managing the properties that HE owns.