Partnership considerations for notes

[Sarah Dawson]

I would love to hear some thoughts on a potential partnership with a note.

I have a potential PN to purchase for 80k on an UPB of 112k. This is a duplex that would rent for 600 per side and current value 117k.

It’s close to me and I have driven by the property. It looks to be a solid investment to me.

I am considering a partnership to start with my first note. I would be 50/50 with a friend who is a RE novice. My husband and I have 18 doors in our area and have a PM for most and self manage a few. We have owned property for about 20 years and have some experience.

I would want a formal partnership agreement drawn up by an attorney. I am not sure if I can find one in my area that understands notes.

What would you be sure to include in an agreement?

Thanks in advance for any advice!!

[Don Konipol]

Any partnership agreement has the potential to turn into a nightmare.  I only enter partnership agreement where either (1) I have long and successful business relationship with the other party or (2) we have an agreement whereby I control all decisions.

Here's my deal, I don't want someone else, who may or may not have my best interest at heart voting on MY money.  LOL

The structure you can use is an LLC, which has numerous advantages over having each party listed as a lien holder on the note itself. The agreement can be drawn up giving each party an equal voice, or giving one party full or partial decision making and managerial control. You already know what I think of each party having an equal voice - 9 times out of 10 its a problem, often a large problem.

When everything is going well there is no conflict; when things go south the real problems surface.