Partnership Advice Needed

1 Reply

My buddy and I want to start buying some rental properties and he wants it to be a 50/50 partnership. He has all the money and I have the area expertise along with many contacts. His proposal sounds okay to me but I'm wondering what the BP community thinks.

EX: The property cost 139K and needs 41K in repairs. My partner will put up the cash; 90K for him and he'll loan me 90K at 6%. He says that I can pay interest only until I can pay the principle, which without a term I'm not really sure how it would work. We'd obviously have to iron that out.

I would be in charge of all maintence and he would be in charge of finding the renters. We would hire an accountant, etc. We're thinking this will be a vaction rental. It should have a NOI of about $23,800.

Please weigh in and let me know your thoughts on the basic structure of the partnership. I'm happy to answer all questions. Thanks BP!

Matt

Sounds doable. Another way to structure it is that he's providing capital, you're providing labor. You don't need to have money in the game necessarily, if it he has plenty of capital and only suffering opportunity cost by carrying the note -- you're also suffering an opportunity cost via your time spend.

So you'll end up putting a lot more time into this than he will. Does that time need to logged? Yes, for the sake of fair play. However, this could easily be structured as a strategic partnership -- his funds, your time -- and in the end he gets back everything he put in plus an agreed sum, and you split the difference.

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