How would you structure this deal?
Say you’re going into a property with a friend. He has 2/3 of the down payment, you have 1/3. You have all the underwriting skills, you put the deal together, find the property etc... he just has the cash. 

How would you split the equity of the property?
[{"id": "f0xv0zs", "text": "50/50 \n\nCan't work without each other. Makes a better relationship.", "replies": [{"id": "f0xv71v", "text": "This. If you\u2019re modeling is right, then you win, but without mr equity bags, you don\u2019t have a deal", "replies": [], "depth": 2}, {"id": "f0ypexq", "text": "Yeah but say for example he invests 50 grand and I invest 25 grand he would essentially be forking over $12.5k to me at the close of escrow without the property performing yet.", "replies": [{"id": "f0ytmtd", "text": "That's what it looks like on paper. But if you look at the return on equity invested, he'll just have a lower return.\n\nIf he is a completely passive investor, he should not expect as high if a return as whoever is putting the deal together. More work - higher ROI. Less work - lower ROI.", "replies": [], "depth": 3}, {"id": "f0z0szg", "text": "Then protect down payment money in the agreement. 50/50 split with a $25k payment guaranteed to partner before any splits are done.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "f0xvhw7", "text": "Some will say 50/50 but it's a bit more complicated then that. \n\nSure you should get some extra value for putting the deal together. \n\nBut each person's net worth needs to be considered also. If each partner has vastly different net worths, with one being very low and one being much higher, the person with the higher net worth needs to see more value because of that disparity. \n\nNot sure if that even applies here, but its something most people overlook. In that example even if you both put 50/50 money down, but one person has minimal assets and the other has alot, the person with more assets should get a larger proportionate share.", "replies": [{"id": "f0yc3ns", "text": "The person with more money will want to compare what kind of return they\u2019re getting here versus the stock market. So they\u2019re probably looking for at least 7%?\n\nI\u2019m not an expert here at all. \nBut the deal has to be a win win for both.", "replies": [{"id": "f0z11zj", "text": "Both people want to get the same return, everyone wants to make money. Its about the risk involved is why the person with assets should get a bit more of the pie.", "replies": [{"id": "f0z37b5", "text": "Right and the person with sweat equity wants 50% too. If they get turned down though, what will they do? They have a weaker position. \n\nTheir option is to take their sweet equity to the labor market where they are going to get paid a wage. Which is a worse deal. Or keep looking for investors. It\u2019s much harder for them to walk away if they don\u2019t like the deal.\n\nThe investor with the capital can more easily invest in the stock market or with any other real estate deal.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "f0yp75y", "text": "What does net worth have to do with equity invested in a deal? Or are you talking about assets in terms of property therefore experience?", "replies": [{"id": "f0yue72", "text": "Net worth matters because you have to guarantee a loan, and they will make the guarantee joint and several. That means whoever has more is who the bank will go after.", "replies": [{"id": "f0ywwrf", "text": "Gotcha, that makes sense", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "f0xyl3m", "text": "Give yourself an acquisition fee of 1%. Then an ongoing annual asset management fee equal to 1% of EGR. Then you can also create a promote structure. Tons of ways to give yourself more value.", "replies": [{"id": "f0yfi6a", "text": "This is exactly it", "replies": [], "depth": 2}, {"id": "f0yolbm", "text": "I\u2019m a licensed RE agent so I was thinking I\u2019d get the bayside commission &gt; 1%. What\u2019s a promote structure?", "replies": [{"id": "f0yz6md", "text": "The acquisition fee and RE agent fees are different.", "replies": [], "depth": 3}, {"id": "f1buvof", "text": "You promise your partner an 9% return. All returns up to that are paid pari passu (proportionately). All returns above 8% pay you 45% and your partner 55%. All returns above 10% you receive 60% and your partner receives 40%.  Etc. I usually see about 3-4 thresholds. These are very basic and numbers will always vary but that\u2019s the general idea of a promote structure.\n\nYou can get away with a lot more favorable promote structures as a sponsor for a structure like the one you are mentioning but institutional money is a lot more strict.", "replies": [{"id": "f1cfdm0", "text": "Great reply thanks", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "f0yhyi5", "text": "I would do a JV waterfall structure. Pari passu (66/33) up to a certain IRR say maybe 10%, and then from 10% to 15% 60/40, and then 15%+ maybe 50/50. Just spitballing with the numbers but i think really the only logical way to do it would be a waterfall. This is exactly what they're made for, when one investor has all/most of the money and another investor has considerably less but brings intangible value (i.e. underwriting skills, found the deal, etc.)", "replies": [{"id": "f0yovle", "text": "I like this structure. He is essentially getting the difference his money vs my money until we are 50/50 partners, correct?", "replies": [{"id": "f0ypt2o", "text": "Yes. It's basically a way to compensate the operating investor (you, in this case) for your \"sweat equity.\" PM me and I can share a model with you.", "replies": [], "depth": 3}], "depth": 2}, {"id": "f0ywnbw", "text": "I'm new here and I only understand about half of the words in your comment. Where can I go to learn more?", "replies": [{"id": "f0z9amq", "text": "hahaha no worries! we've all been there. Honestly the internet is your friend. Literally just googling \"JV waterfall structure\" helps. If you are a beginner to true CRE Underwriting I'd recommend going on Udemy. They have awesome classes for like $10.", "replies": [{"id": "f151z36", "text": "Hey, any particular course you'd recommend? Thanks!", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "f0zedb9", "text": "Equity split needs to be more like 70/30 favored  to your side favored... Lower side max to your friend... You can even go with 80/20 to your side favored. Cash is great but you can find investors anywhere.. more like a dime a dozen if you're a somewhat good salesman. YOU are the one bringing the value.. you must keep in mind that YOU are the business.. the expertise, the work. He's just receiving an ROI.. 20-30% ROI is EXTREMELY gracious and is unheard of in any business on a per annum basis. Also write a clause into the contract that provides an option to buy him out at a later date... this will protect your future work and expertise that you will bring into that deal that will exponentially increase the value of your project.", "replies": [], "depth": 1}, {"id": "f0zih3w", "text": "Interesting to see the diversity of suggestions here. I recently did this with a friend for a commercial property we acquired together. We compared valuing his time invested, which we a lot, as $x and allocate the equity pari passu, but this created an unfavorable \u201callocation\u201d of ROI that made me less interested in the deal. So we essentially split the difference. \n\nI guess my recommendation would be to present a few models and see if you can come to terms on what is fair.", "replies": [], "depth": 1}]