Investing in a real estate deal with a colleague. I am paying the down payment (50%), he is taking the loan (rest 50%). How much of the property should I own? My proposal was 55% as I am taking the risk of he not paying his mortgage. He is not budging beyond 50.5%. What’s fair?

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This feels shady. So both of your names will be on the mortgage but only you will have put money towards it? In that case, feels like a free ride for him/her.

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I mean if you have 55% to put down why not just buy it yourself and own a 100%?

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If the properties are low priced, maybe you can even split your 50% to two house downpayments and let your renters pay the rest.

Well first of all putting down 50% down payment seems crazy with interest rates this low

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Haha.. I was thinking the exact same thing. 400K can be spread across a few different properties. If OP really wants this dudes expertise and connections just do it over a smaller property.

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I’m going to be honest this sounds like a terrible deal for you. He’s basically getting a property for free (because the cash flow should cover operations and the mortgage) while you’re taking the risk. If you can’t rent out the property consistently enough to cover the mortgage and the bank forecloses, you lose all your equity and he doesn’t lose anything (besides a hit to his credit score).


I get he’s your colleague, but as others have said if you can already afford the down payment, maybe look into seeing how much a property manager would cost if you don’t have experience and just buy the property yourself. Even with little experience offering sub 55% leverage should get a good amount of lenders interested

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This is silly. I’ve invested in a few deals with an old friend from my hometown (Europe). Way it works is I put up the required equity (the risk capital), he manages everything. Ownership is split 80/20 so he gets 20% sweat which seems fair. He also gets ~$250 per property per month for management. Would be “cheaper” to use a manager but my friend does a good job in sourcing and maintaining the properties, plus managing tenants. This has worked well with RoE somewhere in the teens due to leverage on appreciation and growth in equity. Mortgages are interest only.

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How is he going to pay the loan ? From the income you guys get through renting this property or his out of pocket ?

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I do have rental properties for passive income. So this is what I would suggest, if you think after putting down that 50% and you can pay mortgage, property taxes and property management fee(6 to 10% income) with the income that property will generate then I would buy this on my own

likeupliftinghelpful

This will not end well. Abort.

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Do not put that much down on an investment property. Your cash on cash return will be terrible. Main benefit of real estate is leveraged appreciation which you lose out on be deleveraging with 50% down

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First this person doesn’t feel legit, because this deal is one sided and the terms are terrible. I would reconsider the partner, not the real estate. You may be able to get a better loan and do it yourself. If your friend doesn’t have the cash to write the equity check, and you trust him to be your partner, the write him a separate note at a higher rate, say 7-9% for his half, if he doesn’t pay, you own the property. I would also cash sweep all income to pay down his equity loan before he receives cash. Also, both of you should be on the loan, and both should have to sign for any decisions with the bank. Third, unless this is new construction, your loan is terrible. Get higher leverage. Finally, if he’s doing the property management, arrange a typical market fee, like 4-5% of GPR, and give him credit against his loan balance of that amount monthly.

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Thanks for your perspectives - let me make sure that I am explains it currently-
1) property price -800k
2) input 400K, he takes the mortgage for 400k, which he will repay
3) net return is roughly 8-10% (pre mortgage cost or repayment)~70K annual
4) I get 35k, he gets 35k but he has to repay mortgage
5) he will do all management related work

Still a bad deal?

This is so terrible im gonna vomit

You should think about it before going through with it

Lmao

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