How would you organize this real estate partnership?

4 Replies

I'm not sure how to design this business partnership. 

Scenario: 2 deeded properties that abut one another that share a driveway with a 14 car parking lot (the parking lot is split in the middle, but the driveway is now considered a right of way.)  8 - units, can rent seasonally as it's located in a tourist town for beach rentals. 

Ideally my brother and I would buy the property together and form an LLC and run as a business.

However, my wife doesn't want to enter a "business" relationship with my brother, but instead suggests that we purchase the properties individually (since they are both on seperate deeds).

One property has a commerical space in the front that historically has been used as a take-out food stand, which could be profitable.  This same building has an ocean view and is listed $25,000 more than the other builiding which is priced at $425,000. This building clearly is the better of the two because of the ocean view and commerical unit. 

Therefore, a partnership makes sense so that the entire 8-units and commercial space is run by one entity which splits the income and expenses appropriately.

Since my wife doesn't want to engage in a direct business relationship with my brother, she would prefer for us to purchase the properties seperately; how would you suggest to organize this purchase so that both parties are satisfied?

We could share expenses such as cleaning company, property management, supplies, etc. 

The tricky part is the commercial space which could be very profitable since there is a lot of tourists and foot traffic in the area.  

How would you suggest organizing this purchase so it makes sense for both parties?

Any suggestions would be greatly appreciated. 

If I were you, I'd keep things separate. If your wife has reservations about the legal partnership, she must have her reasons. Money isn't worth straining family relationships. I don't see much in the way of savings by combining things. Prop management is a percentage of rent - so no savings there. Cleaning - you can still negotiate a package deal with the cleaner (if we give the contract for cleaning both buildings, we need a discount). Supplies - I don't see any savings here either.

@Mark Bookhagen , thank you for your response.  I'm leaning that way for sure.  Other shared expenses could include insurance, snow plowing/landscaping and trash removal.  I'm sure there are other expenses that would be less with a partnership.

Insurance would be separate (no discount). You can definitely negotiate with the same vendor as a team, but have separate service contracts for trash/plowing/landscaping/cleaning. The savings of partnering won't make or break the venture. Just imagine Thanksgiving when your brother didn't hold up on his end of the bargain and your wife is upset about it... As his brother, you'll forgive much easier than she would. Best of luck!

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