Real estate co-investment contract: what to check before you sign

Most investors judge a real estate deal by three numbers: estimated return, estimated term and minimum ticket. The contract gets signed in ten minutes. That is backwards. The numbers are a base case; how much you get paid, when, and what happens if things go sideways is decided by the clauses. This guide walks through what to check in a real estate co-investment contract before you sign it. We use our own as the example, including the parts that favour the co-investor and the parts that protect the manager, because that is what you will find in any serious contract.

Deal-by-deal co-investment usually runs on two documents. A framework agreement you sign once, setting the common rules (how profit is split, what reporting you get, what happens on delays, missed payments or death), and an addendum for each deal you join, with its specific terms. In our case both are structured as a Spanish cuenta en participación, a silent partnership: the manager buys and sells in its own name and the co-investor contributes capital and shares in the result.

The practical rule: if an economic term that matters to you is in neither the framework nor the addendum, it does not exist. What was said on a call or shown in a pitch deck binds nobody once the contract states that it is "the entire agreement between the parties", which is standard.

Before you get to the split, check that the addendum says which property your money is in: the specific asset (or, if it has not been bought yet, the commitment to allocate it and what happens if the purchase falls through), the buy, improve and sell plan, and the budget. That property is the deal's collateral, and its ratio to the capital is the LTV: the lower it is, the more room there is between what was invested and what the asset is worth if the sale disappoints. We explain it with data from real deals in what LTV is.

Also check who holds title and whether there is bank debt ahead of you. In a cuenta en participación the property is in the manager's name, not the co-investor's; what matters is that the deal carries little or no outside financing that gets paid before you, and that the contract requires the sale proceeds to go, in this order, to costs, return of capital and then profit.

This is the most expensive misunderstanding. An addendum saying "50/50 split" can mean 50% of the deal's total profit, or 50% of the slice of profit your capital generates. Our framework agreement uses the second reading, which is the norm when there are several co-investors: capital is returned first, then net profit is allocated to each contributor pro rata to what they put in, and the addendum's percentage applies to the co-investor's slice. In numbers:

That is not a nuance: it is €15,000. A good contract therefore carries a worked example like this one, and the addendum shows your estimated effective share. Check three more things in the same clause:

• How "net profit" is defined: sale proceeds minus transfer taxes, agency fees, purchase, works and financing costs. It should be a list, not "the costs of the deal".
• Whether there is a success fee or performance bonus for the manager above a certain hurdle. In our framework it only applies if the addendum expressly provides for it and sets the hurdle; if the addendum is silent, there is none.
• What happens if the deal runs late. Our contract raises the co-investor's percentage by 5 points if settlement comes 3 to 6 months after the target term, and by 10 points from the sixth month. In the example your profit would rise from €3,750 to €4,125 or €4,500. It only applies when there is a profit, but it ties the manager to the timeline.

Many deals do not ask for all the money on signing: there is a deposit and one or more capital calls later, when the manager requests them (in our case with at least ten business days' notice), or a single payment on signing. Check the destination account, that it belongs to the manager's company and not to an individual, and the notice period.

Just as important is what happens if you miss a call. Some contracts penalise a percentage of everything contributed. In ours, the only penalty is losing the deposit: what you have already paid stays in the deal and shares in its result, or is returned to you if the manager replaces your position. Ask before, not once you are in.

A buy, refurbish and sell deal has no maturity date like a deposit. The contract should separate two terms: the target term (the base case; across the 49 deals settled by November 2026, about 15 months on average) and a maximum term (36 months in our addenda), after which the parties negotiate an exit and, failing agreement, the manager starts an orderly wind-down. Also check:

• Early termination: what happens if the purchase never completes (a suspended auction, a seller pulling out, a pre-emption right). The sensible answer is that your contribution is returned and, if the manager collects any penalty from third parties, it is split as profit.
• Transfer of your position: deal-by-deal co-investment rarely has a secondary market. Our contract makes the position non-transferable without the manager's consent; if you need to be able to sell early, this is not the right product.
• Death: your heirs should step into the economic rights in live deals and receive the settlement. This matters if you are investing, say, an inheritance with the next generation in mind.
• If the manager stops operating: termination of the framework agreement should not affect live deals, which settle as normal.

Because the co-investor in a silent partnership does not manage, the reporting clause is their main control tool. It should list what you receive and when: initial deal information, periodic updates on milestones and deviations, prompt notice of any material event, and a final settlement showing income, costs and profit line by line. Be wary of a contract that only promises "reasonable information".

Then come the clauses that protect the manager. Read them calmly, because almost every serious contract has them: a limitation of liability (in ours, to wilful misconduct or gross negligence, and never above what you contributed), the business judgment rule (a decision made in good faith and on the information available is not negligent just because it turns out badly), confidentiality, a non-compete (12 months in ours: you cannot buy the deal's asset on your own) and jurisdiction (Barcelona, after 15 business days of prior negotiation). None of these is a red flag in itself; finding them only after you have signed is.

Finally, tax: the contract should state how your income is classified (in a cuenta en participación, investment income with 19% withholding for a Spanish-resident individual) and who withholds it. The details are in our guide to real estate investor taxation.

1. 01Which specific property is my money in, and what is the deal's LTV?
2. 02Is there bank debt that gets paid before the co-investors?
3. 03Does the split percentage apply to total profit or to the slice my capital generates? How many euros would I get in the base case?
4. 04How is net profit defined, and which costs are deducted?
5. 05Is there a success fee for the manager? From what hurdle?
6. 06What happens to the split if the deal runs late?
7. 07What is the maximum term, and what happens when it is reached?
8. 08What do I lose if I miss a capital call?
9. 09What reporting do I get, how often and through which channel?
10. 10How much of its own capital is the manager putting into this same deal?

The last one is in no clause and tells you the most. A manager whose money sits next to yours has the same interest as you in a fair split, sensible timelines and controlled costs. That is the core difference between co-investing with whoever runs the deal and joining through an intermediary that only pools the money: it is the real estate co-investment model we follow.

At Invernova we put our own capital into every deal and publish the outcome of all of them in our track record: 49 settled deals, 0 failed, an average return obtained by co-investors of 19.6% and €10.7M returned (live figures from the site). And the less flattering part: 10 of the 49 settled by November 2026 closed below their estimated return.