Here’s where I calculate general partner (GP) and limited partner (LP) returns. If you don’t have enough cash to do the deal on your own, you will have to bring on LPs. These are usually wealthy people with money to invest, but who don’t want to do the hard work themselves. In this case, we assume you can bring $5k to the table, and bring on a partner for the rest.

Look at the box in the top right — this is how you will split returns, and it’s called a “waterfall”. In this case, we have five “hurdles.” The first hurdle is for returns up to 11%. We will return invested capital and distribute returns up to a project ROI of 11% in whats called a *pari passu* structure. *Pari passu* means “at the same rate or equal footing”. Basically, our limited partner contributed 74.35% of the capital, and he or she will receive 74.35% of the profit up to a total ROI of 11%. Now we see additional hurdles in which the GP (that’s me) makes more return than the LP. This is how I like to get paid back for doing all the work, and LPs also like to see this because it motivates me to stay on budget and on time — and to make sure I did a good job of estimating the ARV.

There’s no set way for you to structure a GP/LP deal structure. Some folks like to take a set management fee. Really, it’s whatever you and your LPs agree on. **I’d also like to note that any partnership agreements should be done by an attorney.**

**I hope you found this post to be useful and enjoyable. If you have any questions, comments, or if you’re ready to get started investing in flips —**

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