Rental Property Partnership

1 Reply

Hello BP,

I have a situation on my hands and I want to know the proper way to go about entering this partnership.

I have a business partner who purchased a house for 5k at the auction. The property appraised for 52k.

We estimate that the repair cost to have the property rental ready will take about 28k. The bank has offered to loan me the 28k to rehab the property with a 15 year term loan with the first 6 months (repair time) being interest only payments.

Our agreement is to rent the property for 2-3 years and then sell the property. The home is located in Tulsa, Ok in a neighborhood that will definitely increase in value as it’s in the midst of being revitalized.

My question is how should the agreement be arranged. We have basically agreed to just split everything 50/50. The loan and property will be under my business. So once the payments are made each month from the renter we will split the profits equally and then once we sell we will split the profits equally again.

Are they’re any contracts available with the language available for this particular type of partnership and is the 50/50 split appropriate even though all of the risk (loan) is under my business name.

Seems best to create a new business to have the partnership structure.

Make sure you consider the tax implication of your current structure. I'm not a tax pro, but it seems like you would be on the hook for all taxes. You may be able to 1099 your partner to levelset that but I'd get a professional opinion first.