NEED ADVICE: Want Out of Multifamily Deal
Hello all,
I'm looking to get out of a 5-unit multifamily property my business partner and I have. We have a 50/50 partnership under our LLC. I want to take my portion and diversify into other properties and he wants to hold. He is not willing to buy me out based on the fair market value of the property and so I'm a bit stuck.
What are some creative ways I can get out of the deal that would be a win-win for both parties?
Cheers!
#2 All Forums Contributor
- Real Estate Broker
- Lake Oswego OR Summerlin, NV
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#2 All Forums Contributor
- Real Estate Broker
- Lake Oswego OR Summerlin, NV
do you have a buy sell agreement in your operating agreement.. if so follow that formula.
if not then you are stuck if you wont accept his offer.
its very common for the exiting partner to take a hair cut.
I'm just learning here, but did take a real estate license class a while ago. I recall, there was something of a contract / agreement that states you can sell your half, regardless of what the partner wants. Not sure if that's something you can do here and obviously I'm not trying to give legal advice. Just something you may look into.
I look forward to seeing what your resolution is and thank you for sharing this here. I'm eager to learn more about real estate and this sort of conversation really helps.
Best of luck to you Sir!
Doesn't want to probably means can not pay right now and maintain a decent lifestyle.
Your operating agreement may address what to do, if so that controls, unless the two of you want to amend it to do something different.
Could you take a 7 year mortgage as payment for your half (???)
But the reality of it might be, you are in it forever.
It looks like you are in Austin and the property is in Detroit, if your operating agreement does not address this, or you have none, the laws of your state of Domicile will probably control this issue.
If this is a $10k or $20k value, letting it ride, will not be as bad as a $200k investment on your part.
I will say this though, be wary of letting this issue cut into your interpersonal relationship with your partner.
Try to keep things friendly and on good terms--because the drama of being in a long term antagonistic situation with a partner is not worth it.
Which reminds me of when this guy comes to get his 10% and things go awfully wrong: https://www.youtube.com/watch?v=4dGOfFbzvq4
#2 Innovative Strategies Contributor
- Washington, D.C.
Everything Jay said is right.
You might also think about someone else buying your shares. Even if the operating agreement forbids it, you could just ask your partner for an amendment and he might say yes.
@Shayne Hastings ALWAYS, ALWAYS, ALWAYS have an exit plan in your partnership strategy. I learned this the hard way not once, but twice which ended up costing me over $100,000 in court fees.
#1 All Forums Contributor
- Investor
- Virginia
@Shayne Hastings
I wouldn't buy a partner out who wants out at FMV either. If I was your partner I would start at your original investment amount and negotiate from there but would not pay more than 70-75 cents on the dollar
If you try and sell your 1/2 a similar thing will happen as no one is going to pay full price for 1/2 a LLC with no liquidity or exit strategy.
Sorry be bearer of bad news but I would look for exits but realize FMV is probably a fantasy
Quote from @Shayne Hastings:
Hello all,
I'm looking to get out of a 5-unit multifamily property my business partner and I have. We have a 50/50 partnership under our LLC. I want to take my portion and diversify into other properties and he wants to hold. He is not willing to buy me out based on the fair market value of the property and so I'm a bit stuck.
What are some creative ways I can get out of the deal that would be a win-win for both parties?
Cheers!
You are the one who wants out so you are likely going to have to give a discount to entice your partner to buy you out. This should have all been spelled out in the LLC operating agreement from day 1 but most don't seriously consider all the future possibilities.
Check the laws in your state. You should also consider mediation. It's a lot cheaper and friendlier.
