Opinions on a rental partnership

3 Replies

I would like to hear some opinions on partnership agreements from some BP veterans that you have used. Or what agreement you would consider.
Two people would like to purchase a rental house. Person A will deal with tenets, renovations and maintenance. Person B will be bringing the money, and would help with renovations and maintenance. I would like to here from people on both sides of the coin.

Issues like.... 
How is the income split. 
Who's name goes on the property. 
Who pays for taxes, insurance, maintenance. 
Exit clauses if someone wants out. 
Differences if the house is bought cash or financed.

Any information a newbie might need to consider before I jump in would be appreciated.

I would recommend not doing a rental purchase partnership because its seems inevitable at some point you will disagree on something. So I would avoid it if possible unless there is a proven dynamic between you and your choose partner.

Following this post!

I have a relative who recently expressed that they would like to partner with me on rental properties. I am curious to hear other BPers' thoughts on and experiences with partnerships that do not involve going into business together full-time (i.e. just one or two properties)- how they structured the partnerships, how things worked out, and what are important considerations.

Guaranteed Rate
Guaranteed Rate is a top mortgage lender
Save $1,290 on your next home – no lender fee*
Get special perks like $1,290 in lender fee savings when you buy a second home with Guaranteed Rate.
Apply Now

I think using a partnership to get started is a great idea. For me, the partnership made it real and took away the excuses I kept giving myself to start my first deal. Once I agreed on a partnership(partner was also a first time investor) I found that we both pushed each other to do what was needed in a quicker time to get our first 2 deals done. 

I don't think the inevitability of a disagreement is enough to outweigh the pros of partnership. I have already disagreed on some small things in my partnership and I wouldn't doubt at some time we will disagree with bigger issues. However, a disagreement or a partner's decision to change direction can be handled when it comes. It won't erase the profits or knowledge gained. I would much rather spread the risk and have another brain looking at what I am doing than just mine. 

We put both our names on the title just in case. We made a business plan together to make sure our short and long term goal were aligned. We have not talked to a lawyer yet about our partnership agreement but hopefully by the end of the year we will. For a long term partnership I think a 50-50 split on income and responsibilities would be best. Our exit clause states that the remaining partner has 5 years to buy out the leaving partner by paying them 50% appraised value of assets. If they can't get the cash for this we would need to sell properties till we had enough to buy them out.  

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you