Partnership Structure with Refi

[Patrick Menefee]

Question for the group as it relates to partnerships.

How do people typically handle a partnership when a refi occurs and there’s no longer any cash in the deal? For example, I buy a property with a partner and because we initially have both names on the mortgage and split the down payment (and rehab), so we split the cash flow and equity 50/50.

We then after the rehab pull out all of our cash in a refinance, but the refinance is only under my name. Do you change the split for either CF or equity now that partner 2 has no skin in the game? Is it better to keep both names on the refi? How do you handle something like this?

Thanks!