Investor · Centreville, VA · Member since 2013 · 15 posts · 4 votes
I'm meeting with a lawyer Wed so I should have my asnwer. But, there is always such good advice on this site. so i figured i throw out a question.
I have currently have 2 rental properties both doing pretty well. I bought them both with 25% down and took a loan for the rest. I'm now thininking about selling 50% of each to a partner. the deal would be structured like this. he pays me 50% of my cash in and assumes 50% loans. he gets 50% monthly cash and 50% equity. I maintain all decision making.
I feel i made really good purcahses on both of the properties so I'm so inclined to get give up 50% equity. however, getting 50% of my cash in could really help me get my next deal.
i know i haven't given you a lot to work with but any thoughts or comments would be awesome
How long have you held the properties? Have you built up extra equity on top of the down payments? Don't sell yourself short.
You need to also calulate the risk you took to purchase these properties in the first place without knowing you would get tenants at your price. Your buyer should pay a premium for not having to face the risk that you did.
personally I'd rather own 100% of 4 properties than 50% of 8. If you are doing well with the properties yourself, then why add a partner? A lot of times partnerships don't work out and one person winds up doing all the work. I would take my cash flows from the units you have now and save them. Put as little down on the next property as possible. The rates are better the more money you put down but the more cash you save, the more properties you can buy.
for me I'd rather have financing, such as a refi, than a partner and I've had some real good partners. But you give up some decision making and some autonomy even if the partner is 49% or less and silent partners never seem to be silent.
Seems to me like he Is getting an awesome deal. You found the properties, got them rented, got loans, may have done rehab and then he gets to come in with 50% cash and share 50% profits. I think 75% 25% would be fair if I did a partnership, but I would prefer not too. Are your loans assumable? You may not be able to add him on.
I agree with others, I'm not sure what you are really gaining by bringing in the partner. However, if you do, you will probably need to set up some kind of entity that defines the ownership stake. I'm not sure how you would add someone onto an existing loan. Regardless, put everything in writing. Especially if there is a stipulation that you guys have 50/50 ownership, but you make all the decisions. If something like that is not clearly spelled out, it can cause problems later.