How to structure deals with investment partners?

Question

Can someone please share some examples on how to structure a RE deal when you are investing with an investment partners, who is not involved in acquisition or day to day management?

Also, how do we structure it legally -

1) When you have an investment partner who is on the title?

2) When you are just taking private loan to buy the property in cash, but you have only your name on the title?

Thanks in advance!

Chris Mason · Answer

Hi @Ritesh Bagga,

One structure that I like, because it keeps duties and responsibilities and ownership, etc, super clean and automatically well defined:

• Capital partner does private mortgages (including 2nd, 3rd, etc, position mortgages) secured by OTHER real estate you own, for down payment and cash to close.
• This actually is Fannie Mae friendly. For example you can take out a 75% LTV first mortgage, and have the full down payment come from a second mortgage on another property you own.
• Many private investors/lenders will not go for it, but if there is a super high level of trust, note that it's up to the capital partner if she or he is willing to do super high CLTVs.

Jonathan Godes · Answer

If your investment partner is on the title, and providing the majority of the funding, a percentage split (something like 50/50) is standard. A JV Agreement contract should be worked up by an attorney to protect both your interests and outline roles and responsibilities.

If you are just taking a private loan and have the title in your name only, you should provide a % return to your investor and give them 1st position mortgage lien, a guarantee agreement and promissory note.

Rosston Smith · Answer

I am interested in these replies as well. I don't know too much about this.