Working with a partner and avoiding getting burned

6 Replies

I have decided to start branching out into different markets, and though I have gained alot of expirience with the deals I have already done I'm looking to partner up with active locals to gain more insights into underwriting new deals.  My biggest concern is getting a property under control, and then having a prospective partner take the whole deal and leave me out.  What are some good ways to avoid this?  

create a company together and everything goes under the companies title

My first choice would be to avoid any partnership!!

If I HAD to I would form an LLC for the partnership and define EVERYTHING in the paperwork.

Jacksonville appears to be a good investment area, why branch out ?

I have been able to partner a few times successfully, but you have to be careful.  

An LLC, with everything spelled out, (you will miss something, but cover anything you can think of).

Make sure you have an exit strategy, (multiple exits better).  I like 5 year terms, where one can buy out the other, sell properties to liquidate or renew for another 2-5 years.  

There are more kinds of partnerships than we can possibly cover in this thread. Look into an attorney, to help you outline everything. You may be glad you spent a little more up front to ensure you cover your bases. I also like the idea of limited time options to exit. Find someone who brings a lot to the table and shares your values and goals.  

Everyone, thanks for the replies so far.  I have been really hesitant to take on any kind of a partner, but at this point to hit my goal, I just don't have the funds/time to run everything myself.  I also want to develop my own knowledge more quickly than reading and forum lurking will deliver.  

@Dean H.   Great question on Jacksonville being a great market.  NO doubt there, but I'm worried we are getting a little over our skis a bit.  There is a massive amount of development going on, and no major new employers (aside from the Amazon warehouses) coming to town.  I'd like to see another corporation locate a major operation here.  The other considerations for me are that, it's still a pretty military-central town, and my apartment building is in Norfolk, another military-central town.  Both are close to the water too, and even before this hurricane season I was a little paranoid about the risk of a big storm potentially impacting both at the same time.  

We had an LLC and the LLC has "shares" for each participant in the LLC. So in order to take over the LLC, you have to buy out the shares and its there that there is a possible issue. Everyone's valuations are different.

Better to have an LLC with your own ownership or spouse if you need their income for verification on notes.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here