Updated about 9 years ago on . Most recent reply
New investors - Questions about Partnership
Hi all - A good friend and I have decided to begin our adventure in real estate investing and will soon be ready to purchase our first multi-family property (triplex or fourplex). We have done our research and are on the same page as far as our strategy... now we need to figure out how to structure the partnership in a fair way and put it in writing. Essentially, the idea is for each of us (let's call us Partner A and Partner B) to contribute 50% of a 20% down payment on the property. Partner A will finance the remaining 80% through a conventional mortgage. We plan to cover the expenses 50/50 (mortgage, insurance, taxes, repairs, etc.) Partner A will also be responsible for managing the property. The goal is to buy another rental property next year with another 20% cash / 80% financing strategy. With this general scenario, what would constitute a fair split in rental income/profit from the sale of the property? The down payment and all expenses are being split 50/50, but we are wondering how the fact that one partner is responsible for the mortgage, and has to manage the property, should affect the split. Would also love to learn about what the tax implications are for Partner A who signed the mortgage. Any advice is greatly appreciated, thank you!
Most Popular Reply
I wouldn't do it. One of you will do most, if not all, of the work and the other will expect their 50% of the profits for doing nothing. The only partner that I would go into a real estate deal with is my wife. It's 50% hers anyway.
Other than putting up half of the down payment, why would partner B in your example, be necessary? It would be different if partner A was putting up all the money and partner B brought all of the knowledge, management, repair, effort, etc. Even then, I wouldn't do it. Good luck.