Partnership contracts with sweat equity partner

[Account Closed]

Hi everyone, 

I'm currently pursuing a partnership with two other colleagues and have few questions as it relates to partnership agreements and forming an LLC.

1. Partner A and B will be providing the capital for a property with intentions to BRRRR. Partner C is going to contribute time and work by helping with finding deals, doing most of rehab and property management.

As It relates to a partnership agreement: Can anyone provide good information on how to draft a partnership agreement for this type of partnership? How should a contingency look in the agreement if we decided to exit and sell rather than BRRRR?

2.When to start an LLC? If our collective goal is to buy several SFH properties annually, use the BRRRR process and eventually trade up in bigger multifamily properties, when should we start an LLC. Should we do it now before our first deal? Should we do it at all? I recall mention of difficulties with LLCs when it comes to refinancing properties. Is that true? Anyhow, any feedback would be much appreciated. Thanks.

[Alina Trigub]

@Account Closed

All good questions. It's important to discuss these with your attorney. If you're entering into a contract with others, an attorney needs to draft up an Operating Agreement which will have to spell out the terms, roles and responsibilities as well as any potential what if clauses. You should form an LLC now so that attorney drafts the paperwork for this entity. Ask around for attorney recommendations and pick the one that resonates with your thought process the most. Note, what I am mentioning here is not a legal advise, rather a suggestion that must be discussed with attorney.