Real Estate Partnership Questions
Author: Joshua Dorkin • URL: http://www.biggerpockets.com/November 16th, 2006 •
I was talking to some friends who were looking at purchasing a condo together. They wanted to know what I thought about the premise of them owning a rental property as partners.
Should friends or family purchase rental property together?
I try to advise people to stay away from partnering with friends or family, because more times then not, the relationship changes and not in a good way. With that in mind, if you are planning on a partnership, there are a few things I’d recommend you do.
Questions to Discuss:
- How you’ll purchase the property
- Who will make payments on the mortgage? Utilities?
- How will you split up any monthly profits?
- Who will manage the books?
- Will you manage the property or will you hire a management company?
If there is NO management company
- Who will be the point person for contact with the tenants?
- Who will handle repairs or maintenance issues?
If there IS a management company
- Who will be the point person with the manager?
- How much can one person authorize or spend without the other partner’s consent?
- What happens if one partner dies? Is incapacitated?
- If the property is sold, how will the profits (if any) be split?
Once you’ve talked about these questions and have agreed upon the answers, you need to have a sit down with a real estate lawyer. Draft up a partnership agreement and be sure you are both comfortable with EVERYTHING in it.
If you’ve got additional questions to add to the list, please let us know.
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Joshua Dorkin
Charles Feldman
Ted Karsch.
Richard Warren
I strongly agree with you that you should not partner with relatives or friends. As an attorney for over 25 years I have seen my share of horror stories–family members suing each other, not talking for years and terrible badwill where other family members are forced to take sides.
And this happens even if there is a well drafted agreement. It just isn’t worth the risk. I have seen disputes over the most minor detail that you would overlook with a non-family member. BUt family members argue over everything. Just don’t do it.
PS: This happens even if one puts up the money (silent partner) & the other does all the work. There is no such thing as a silent family member or friend.
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Hi, my name is Doreen & I’m not sure if u could help me or not but i just have 1 question. I would like to know the percentages if i rent out my home compared to if a real eatate rented it out for me. Statisticly am I better off going with an agent or doing it myself?
If u could email me asap that would be much appreciated.
yours,
Doreen
Doreen - What percentages are you looking for? Do you want to know how successful you will be compared to an agent? It depends on the amount of work you put in, and how you advertise. The best place to ask this question would be on our forums - http://forums.biggerpockets.com
A few questions worth consideration:
Who will own the bank account(s) tied to the property?
Who will manage the bank account(s)?
What happens if a partner wants out?
How to determine equity value at the time of sale from partner?
What is the payment schedule, if any?
What is the interest rate, if any?
I think a partnership agreement or operating agreement is essential for any form of partnership. Also, a limited liability company or limited partnership might make more sense for some folks.
My parents could not purchase a home because of their credit so the house was bought under my sister and my name with the money of my parent. I have records showing of the funds transfered. Now that my mom has passaway and wrote a will how the procede will be divided.
My sister who is in the deed and not on the loan is not agreeing and taking me to court for a higher amount. The loan is under my name only and been paying for the mortgage and property tax since she got married left the house seven years ago. She has been paying and living in the house five years before I moved in to take care of my mom. During that five years of her stay I shipped and provided two cars and upgrade the house with my own funds. My question is even thou my parents are not in the deed nor loan but it was their money that put a big down payment do the will of my mom take place at all? Does my sister have the right to force me to move out to get her share? What type of lawyer do I need?
Thank you in advance,
jun
I am interested in buying property as pre-construction for a church.
We will hold the title and investor will pay $15,000 with a financial return of 20% at closing. The cost of the property as is (one small commercial building and a house) is zone general commercial. It contracted price is $350,000. Are you interested in financially investing?
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Funny my wife & I were only talking about this last night, she seems to think it would be fine but can’t imagine it working. Even with a contract it is very risky & you can end up stretching a good friendship.
I certainly wouldn’t do it!
Regards, Art.
i wouldnt buy one. i think a house is better und in lifetime cheaper than a condo.
I would prefer the condo, a house will always be more expensive, if you want to live right in a city…
I bought a condo with 2 friends. Everything went very well and we did not even make a contract..
Question:
I am part owner with two brothers in a hunting camp. If I buy out one brother’s 1/3 interest and become a majority owner, does the other brother with only a 1/3 interest have a say in improvements being made and does he have to provide 1/3 of the cost of the improvements made?
Can I shut him out so to speak if he does not contribute a fare share? He is basically lazy and a do nothing.
Real Estate Partnership question.
My family inherited one third share in a number of properties. We do not want to remain partners. We want to either buy out the other two or they should buy us out.
How do we go about doing this?
My aunt owns a house with her brother in law in brooklyn,ny. She would like to sell it and buy a new home for herself and kids. however, Her brother in law doesn’t want to sell. Can she take her share legally and still get a fair amount without selling the home?
My stepson through illigal means became my partner in a vacation home in the Poconos & gives it to his friends to use. What is my right as an owner?
If you have other opportunities, do not try to purchase rental property with your friends or family.