Sweat Equity Partnerships ?

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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.

Comments (12)

 
Most Helpful
Jul 29, 2019 - 10:49am

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.

“The three most harmful addictions are heroin, carbohydrates, and a monthly salary.” - Nassim Taleb
 
Jul 29, 2019 - 1:35pm

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.

“The three most harmful addictions are heroin, carbohydrates, and a monthly salary.” - Nassim Taleb
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