Hi, I want to buy a multifamily home with my relative. General idea: I pay cash for entire house and for renovations (already got funds). My partner is in rehub business, he will do renovations. After renovations are done I refinance the house and take mortgage on my name. Since this time we own house together 50/50. He is responsible for house maintenance, work with tenants and property management. I pay mortgage, and we split remained cash flow. If the house is vacant, or require renovations, we split the expenses. For exit strategy, if one wants to sell, the other can buy the second half by market price, or we sell this house, pay back mortgage and split remained funds.
Please tell me, what roadblocks should I consider? What potential problems I should think in advance? Is there a standard agreement for this type of purchase? Please recommend any literature that I should read first.
Appreciate your help.
There are many issues most investors ignore and "wing it".
A partnership agreement should be signed covering the following:
- Specific duties of each partner
- Penalties for not performing those duties after proper warning
- If more money is needed, how capital calls will be handled
- What happens if a parnter cannot meet their capital call obligation
- Specifically how assests will be liquidated
- The process of a partner leaving the partnership and selling their ownership
- What happens if a partner is incapacitated or dies
- How the partnership can be dissolved
There are many more issues, so a competent & experienced attorney should be hired.
Just don't make the potentially fatal mistake of thinking it's all a matter of trust.
Hi @Drew Sygit . Thank you for this clear outline of potential issues that should be discussed upfront. Do I need a real estate attorney, or it's a different attorney for business partnership?
Many attorneys specialize in specific areas, but also are jacks-of-all-trades. So, just ask.