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Investing with Partner / Tenant???

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Blake Kinsman

Real Estate Investor from Morton, Illinois

Jan 15 '13, 11:35 AM


I have a potential partner that is also looking to buy his first home. How could I structure a deal in which he is the tenant and partner?

Some of the advantages I see:
- We wouldn't need to put 20% down for a conventional investment loan.
- I may be able to capitalize on any first-time home buyer incentives he gets.
- I would trust the tenant.
- My partner would be conveniently located for updating the property.
- There would not be a rush to flip the property.

Questions:
- Would I be able to collect any monthly income, or would I have to wait for sale of the property?
- What type of contract should I put together to protect myself?

Thanks in advance!

- Blake



Marc Bodinger

New York City, New York

Jan 15 '13, 11:53 AM


In my opinion that more partners you take on the more complicated the deal becomes. This sounds like a rent to own scenario. Why can't you own the property at first and then when your partner can afford it he can just buy it from you. Would that type of framework work?



Blake Kinsman

Real Estate Investor from Morton, Illinois

Jan 15 '13, 11:59 AM


Well we are looking to start acquiring rental properties together. He can afford it, but we were just brainstorming trying to figure out if there is a way to make his house be our first property.



Tracy Royce

Foreclosure Specialist from Scottsdale, Arizona

Jan 15 '13, 12:00 PM
1 vote


Hi Blake tread lightly in these situations. It can work and I've done it, but the property is titled into a trust with outlining trust docs and partnership agreement. Be very explicit on your terms and agreements.

There was an article posted recently on the BP blog about partnership agreements, written by an incredibly smart author (ok ok it's my post) In any case hope this helps:

http://www.biggerpockets.com/renewsblog/2013/01/10/real-estate-partnership-agreements/



Blake Kinsman

Real Estate Investor from Morton, Illinois

Jan 15 '13, 12:14 PM


Thanks, @Tracy Royce. I actually read your post last night...great advice! Like I said before, we are currently just brainstorming on how to kick this thing off. We figured he could live in it while we fixed it up (it's a street over from my house), and then when the conditions are right, we would sell it and make millions! OK, more like $20k.



Tracy Royce

Foreclosure Specialist from Scottsdale, Arizona

Jan 15 '13, 12:37 PM


Haha I like that you're thinking creatively, that's great. Let us know how it goes Blake!



Steven Hamilton II Verified Moderator

Real Estate Investor from Lake Villa, Illinois

Jan 15 '13, 12:39 PM
1 vote


@Blake Kinsman,

Follow what @Tracy Royce said very carefully. It is a very tight situation working with friends. I have seen MANY friendships broken due to working together. I've seen many dissolve and end with legal issues.

-Steven



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