I have teamed up with 4 other newbies(2 brothers and a cousin). Each of us works full time and are excited for the journey ahead. We are currently in the final stretches of escrow and hoping to land two 4-plexes. What are some do's and don't when it comes to partnering on an investment property. We are family but want to make sure we have a solid business foundation and professional boundaries. Any and all advice would be much appreciated.
@Austin Nieves You need a business agreement IN WRITING. Everyone must sign, and always follow if any disputes arise. It's called a Partnership Agreement. Go to a Real Estate Attorney. Remember, friends and family make it very hard to do business sometimes. That's why it's not always a good idea. A business partner may not work out, and you don't have to see that person again. A family member will always be there, and if the business went bad, will cause a rift in the family. If you can all agree and sign a document, that's up to you guys.
Definitely have a fully Executed operating agreement with a shotgun clause. With four partners it is likely that over time the goals and needs of each partner will change.
Hi Austin! We're on the same boat. My husband and I are partnering up with a couple of friends to buy out of state rental properties (we all work full time jobs too). We live in Long Beach/Cerritos area... We were initially going to start an LLC, but now not so sure anymore. Some say a regular partnership will do for what we're trying to do. Really interested to see the responses on this post.
Have you guys talked to a RE attorney? We're looking to team up with one in our area...still searching so if you have a great attorney you can refer us to that would be super helpful! :)
@Robert Herrera Thank you so much for your advice. We are definitely going to have terms signed and on paper incase things do go south (which we don't intend on). Fortunately we have a great family but you are absolutely right, things change when money is involved.
@Joe LaFleur Can you explain to me further the shotgun clause?
@Krizelle Pum We are basically neighbors. I am in Costa Mesa and these properties are in Arizona. I am lucky enough that both of my parents are lawyers (not RE but my dad does construction law and has some connections) and have been able to assist us along the way. We have created an LLC but also have heard both sided of that argument. Excited for the opportunity but want to make sure everyone is on the same page.
That's awesome! Can't wait to hear about the two deals you're waiting to close on. Good luck! :)
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