Liability in investing with a partner with student debt

[Christopher Kolasa]

Hello all. 

Background: I'm looking to buy my first multi-family rental property, a spacious two family home caught my eye in Rhode Island for about $180,000-$190,000, which should be able to get $3000 in rent a month, it needs a bit of work but is in a great location with upside. I'm looking to invest with my friend/colleague who does not have too much cash, but is a tremendous worker, dependable, and previously a contractor; he would bring lots of value in turning the property around and wants to live in the home while we fix it up and thereafter (for at least a year maybe two). Anyway, partner has a substantial amount of student debt (I believe $60k or so), I'm concerned how this would affect our arrangement, would I be liable for any of his debt? We would likely form an LLC and be co-borrowers on a Conventional Mortgage together. Granted, this would be worst case scenario and only a tragedy would foresee such events *fingers crossed*.

Thanks, Chris

[Jeff Bridges]

I don't know if you are able to bring enough cashflow to break even if one side is occupied for 2-3 years by your partner rent free. There might be no cashflow leftover after expenses for your share. Have you calculated your cashflow at half tenant occupied? I doubt your partner would be paying the $1500 market rate. Yes it might cashflow with 2 tenants, but not likely with one. So you would be without cashflow until he moves out. Doesn't sound like a mutually beneficial partnership even if he provides you free labor. You're still out initial materials costs and ongoing repairs costs.