What is a good formula for splitting profits on a rental property investment?

[Maika]

I am involved in a 3-way investment on a rental property and we are being forced to sell because of a DOT project. Our profit on this property will be approximately $75,000 and we need to figure out how to split this up. Being close family members, we weren't too concerned about figuring this out we bought the property.

I would really appreciate any suggestions from real estate investors experienced with partnership investments like this.

Here are the figures for the capital and work/mangement invested by each party.

Investor #1:
Invested $150, 000 by taking out a regular home loan.
Lived at the property and payed "rent".
Did 85% of the maintenance, improvements and rental property management.

Investor #2:
Invested $75,000 from a home equity line of credit.
Did 0% of the maintenance, improvements and rental property management.

Investor #3:
Invested $25,000 from a home equity line of credit.
Did 15% of the maintenance, improvements and rental property management.

Thank you!

[saberhilt]

Were investor 1 and 2 compensated for their maintenance work during the ownership period?

Did investor 1 have a reduced rent during the ownership period?

How was the cashflow from the property divided?

Investor 3 paid 1/10 of the cost, so provided there was compensation for maintenance during the period of ownership, he should get 1/10 of the profit.

Investor 2, 30%.

Investor 1, 60%. if he had bought a home by himself and it had apprciated, he'd be entitled to that appreciation.

Whatever you do, get a lawyer (out of the profits) to draw up the paperwork and have each of you sign the agreement.

Now if there was no compensation for the maintainence and investor 1 paid market level rents during the ownership period, then working in a back pay formula would be useful.

Caluculate an hourly rate for maintainence work. How big was the property? Duplex, 4-, 8-, 60 unit apt building? Find an average number of hours spent on maintainence per week and pay 1 and 3 appropriately. Then you can split the investor profits evenly.