I was talking to some friends who were looking at purchasing a condo together. They wanted to know what I thought about the premise of them owning a rental property as partners.
Should friends or family purchase rental property together?
I try to advise people to stay away from partnering with friends or family, because more times then not, the relationship changes and not in a good way. With that in mind, if you are planning on a partnership, there are a few things I’d recommend you do.
Questions to Discuss:
- How you’ll purchase the property
- Who will make payments on the mortgage? Utilities?
- How will you split up any monthly profits?
- Who will manage the books?
- Will you manage the property or will you hire a management company?
If there is NO management company
- Who will be the point person for contact with the tenants?
- Who will handle repairs or maintenance issues?
If there IS a management company
- Who will be the point person with the manager?
- How much can one person authorize or spend without the other partner’s consent?
- What happens if one partner dies? Is incapacitated?
- If the property is sold, how will the profits (if any) be split?
Once you’ve talked about these questions and have agreed upon the answers, you need to have a sit down with a real estate lawyer. Draft up a partnership agreement and be sure you are both comfortable with EVERYTHING in it.
If you’ve got additional questions to add to the list, please let us know.