Partnerting

2 Replies

HI all,

I'd like to get some feedback of partnership strategies.

I have been buying for cash for my own portfolio and I now have some folks interested in partnering on deals with me.

Since i have to move fast when I find a deal, it's cumbersome to get the funds ready from partners at the time of purchase. So I've been thinking about doing the following to bring in a partner:

  1. My LLC purchase the deal with my cash initially - this way I can move fast.
  2. Have a partner buy into the deal after closing by paying me 1/2, 1/3 (or what ever) and he now becomes part owner (a new deed will be recorded showing new ownership percentage)
  3. Set up an agreement between partner and my LLC regarding profit splitting/management fees etc (partner is passive)

What do you guys think? 

Some questions:

  1. Do I need to set up a formal partnership for this? (I'd like to keep it as simple as possible)
  2. What are the tax implications of the partner buying into the deal (if any)?
  3. other issues??

I know I can just do a debt based loan and pay the partner interest without putting him on the deed (use a DOT instead) but I prefer asset based investments.

Appreciate any input.

Thanks

I think it's smart to buy alone and add partners later for the reasons you stated. 

Question 1: LLCs have members not partners. How ever you do it - partnership or LLC - you need formal agreements.

Question 2: Consult with your CPA. Also, tax matters are often set forth in the LLC or partnership agreements.

Question 3: Consult with your attorney about structuring your agreements and have your members/partners consult with their own attorneys/CPAs.

Thanks @Account Closed ,

I meant partners as in my LLC partnering with partners. They will not become members of my LLC which is just a single member LLC.

Agree with your consultation advise. Just thought a discussion would benefit as well.

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