A partner and I have recently gone into a joint venture to purchase an investment property that we will also be living at. Previous to this he owned a property and I rented off of him.
He wanted to sell his current property as the market has increased his value by quite a bit. He came to me to see if I wanted in on the next property at a 75/25 split.
He has put down the entire down payment on the new property using the funds received by selling his old property and we had agreed to split mortgage payments 75/25.
We are currently going through the JV agreement with the lawyer and it states that when we sell the value received will be split proportionately in addition to him receiving the increased value in his initial down payment. So if the property increases in value by 15%, he would receive his down payment + 15%.
Say the property cost 500,000 and his down payment was 100,000. If the property increases to 600,000 and we sell, he would receive 120,000 (down payment + growth of 20%) as well as 360,000 (75% of remaining 480,000)
My question would be, is this normal or seem like a fair situation?
In my mind the return in the investment is seen in the increase in property value at time of sale, NOT the aforementioned in addition to an increase in down payment. I can’t help but feel like I am being treated as a stock market paying out returns on his down payment. As far as I know when you purchase a house that down payment can’t be invested and give returns, the return is based upon property value at time of sale.
Looking for any advice