Would you JV with somebody i’m just one house?

Question

So I have JV with people before if it was a quick In-N-Out transaction such as a whole sale ect. Other than family I’ve never JV with somebody on a property that would be held long-term.

I have a property that I have contracted that I am considering possibly inviting a friend into the deal in exchange for a very light down payment, most of which he would get back in a couple of months. The challenge is if we done it this way it would be like I was creating a long-term partnership on one house. I'm a little reluctant to be involved with someone long-term over one house. I definitely wouldn't want to create an LLC over one house due to extra bookwork and tax prep. Maybe I'm overthinking this and this would be easy Peezy no big deal.

What’s your thoughts?

Peter Mckernan · Answer

I would only really do a long-term hold with someone on the minority side of the equity split. This would be I own 70%, you own 30%, and I will make the key decisions and manage the property etc. I have had 50/50 JV deals with people (one I just sold last year that was held for 10 years). It was tough since I was doing all the work, worked through an insurance flood and all and the person still could tell me to sell or not sell, and got the same equity position as me.

After that experience, only short-term deals on flips (of course, have it padded if the market turns and hold becomes the only option). As for knowing what you are getting into something for longer years (i.e. LTR) then I would structure it as an equity play towards you versus being split if you are doing all the work. Clearly define the roles for you both in the OA as well.

Daniel Tanasa · Answer

Hello Joe,

I am on the same page with you. Is easy to do a JV with somebody you don't know very good for a quick in and out wholesale or flip, but is a whole new ballgame to do a long term partnership. If you're just getting to know this person, I will probably try to structure it as a debt partner instead of equity partner.

After you do a few deals together and you get along well and you feel like your long term goals area aligning, you can consider holding some long term properties together.

Good luck!

Joe S. · Answer

Good input. The challenge with the debt partner angle is I would feel like I was asking to borrow money from a friend….

Would you JV with somebody i’m just one house?

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