Hello-
A good friend and I are thinking about doing a couple of deals together. We both have something that we are bringing to the table. My credit score is around 660 and she has around 730. We both have income coming in, so I think it would be pretty easy for us to acquire property together. Here are my questions about using partners:
What are you views on acquiring rental property with partners?
Do you just split the cashflow 50/50 for the life of the loan?
How do you acquire rental propery with partners???
I understand how to do the shorter deals. We could just get the property sell and split the profit. I guess it is the long term deals that gets a little confusing. I am just wondering how most of the experts do it with partners. Please advise?!?!?
Let me just say that I am not an attorney.
HOWEVER, I will tell you to set up a business/corporation immediately and do investing in the name of the business. Set up an Operating agreement that details the roles each of you will play. What happens when one of you wants to leave the partnership, etc.
You might not think that anything will happen like that where you might go your separate ways, but it does happen. Sort of like how you get a will to detail what you want to have happen when you die, set yourself up to be safe from differences in opinion in the future on investments.
Hope that helps!
Thanks for the insight. We were very concerned about that. Do most people just split the profits 50/50? I was wondering what usually happens when you finish paying off the loan and one person may want to sell and the other wants to rent. Do you get all this in writing before hand? Do we have to see a lawyer for EVERY deal?? Thanks in advance for you help!!
Since your partnership is new you will need to set up a corp, either a C-Corp or LLC for the rental properties. In the corp setup you will specify the percentage each person makes and liabilities.
You will need to buy the properties in both your names as individuals since your company has no credit and no bank will loan to the corp at all really. Once you close on the properties, you can move it over to the corp so your both protected. Now keep in mind, this is also done alot when people partner up and only one person is using their credit to secure the deal but the other party maybe using their money or knowledge to work the deal and split profits.
uhttp://www.thedirectoriescompany.com/REOs.h
The last link you sent didn’t work…
Will you please resend it for me?? Thanks!!
Not sure why the link was posted but here is the correct link that yrush2000 listed:
http://www.thedirectoriescompany.com/REOs.htm
JDTHELEN
Actually have no idea that link got posted with my reply…Must of had that window open and hit something to make it add to my post…
yrush…
You can modify anything in your own posts by going to that post and clicking the “modify” button…you can highlight the text and click your delete key – gone!
Keith
buying the property is the easy part; set-up the agreement and maintaining business relationship is the hard part.
having done a few businesses with friends, I think it is safe to say that it always put a strain on the friendship. You need to be prepared for that. Second, you are thinking along the right lines in terms of how to set-up an exit for one partner and/or how to shut the business down. No one likes to deal with this issue, but its pretty key (IMHO).
As for splitting the profits 50/50 is certainly no a bad way to go. The tougher angle is at some point one or the other partner may have feeling that he/she is doing more than 50% of thr work or taking on the majority of the risk. That’s not to say that one person is going to sandbag, but things come up in life (health issues, work crisis, personal problems) that may make it difficutl for one partner to put as much time into the venture as the other.
In end, open, regular communication is the key coupled with a written agreement.