In this discussion I'd like to receive others perspectives on "Sweat equity partnerships".
After speaking with an attorney last week, he mentioned one of his clients being only eighteen years old and owning twelve income producing MF properties. I do not know the number of units in each property, but i would assume it's a minimum of 8-16 units. After asking some brief questions the attorney disclosed that the partnership was 50/50 ownership and the eighteen year old's percentage was "Sweat equity". Has anyone ever been in a similar partnership where you receive equal ownership and your percentage is "Sweat equity" from creating an RE acquisition model?
Any feedback is appreciated.
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Just looking for a possible explanation of how this eighteen year old might have done it.
Who knows. Inheritance, social media influencer/youtube $, family money. The kid probably got some money somehow, then was smart and invested it. Good on him
There’s more to RE than building models and sending out LOIs. Other ways he could have earned equity.
Aside from the (very likely) possibility that it is a family deal where the dad/ mom or uncle/ aunt is giving their family a break, there are a few ways I can think of this.
This kid can be a straight hustler who got a property tied up that is prime real estate. He could have lined up tenants (not hard to do for a 2-8 unit property). At that age I would be doubtful he got the property some zoning variance or something like that- but hey, you never know.
50/50 seems high. But I have seen 10/90 off of sweat equity.
Something that I found while researching is equity can be contributed in various ways, but one of them can be an "idea". Unlikely, however if it was presented to an investor as a potential opportunity that's where sweat equity could potentially be given?
Everything is negotiable. Like you mentioned, equity can be contributed in numerous ways. Maybe the kid also agrees to manage the property and run the entire job. Maybe it can be a substantial remodel and he knows how to hang drywall and paint and redo the roof. So many scenarios that can be played out.
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