Buying a Real Estate Rental Property with a Partner

Careful, not cynical

Sometimes, when a warning is given to someone it’s regarded as being cynical! These sensitive souls when it all goes wrong for them, then can turn around and ask why they weren’t told! Being careful is always a requirement in any situation that combines money and personalities. This includes buying and investing, which can involve real estate property management. It’s not only a question of giving your money to someone, but in how well they will assist in managing it and making a profit!

Think smart

Going into a property partnership means you have to be smart, even streetwise supported with legal documentation that clearly determines the form of this partnership. Don’t think about “good guy or girl” now; make sure you’re covered for what could happen down the line. It’s a venture that involves not only property management, but also personal goals and ambitions.  

Being smart is checking and making sure all the numbers add up, such as how the shares will be apportioned, and monthly cash flow, to make the income worthwhile. To get an idea of the returns make a calculation on how long it would take for the investor partner to recoup their initial investment! Sometimes, this can become a very good deal.

A structured partnership

This is a question with variable answers and with many different and wonderful options depending upon the individuals involved and their relationship. Arguably, one of the simplest and easiest structures related to this type of property management is for a partner to finance the sum needed for the down payment and costs on the selected property. The other partner bears the responsibility for obtaining the mortgage and what is associated with it. The result is that the net profits or losses incurred are divided on a 50-50 basis; likewise, if the property is sold.

The equity is always divided on an equal basis and includes the appreciation and any possible refinancing. It is essential that both partners have regular financial statements and ongoing records of every direct deposit made. The property management issue can be determined as the responsibility of one partner, with regular updating of repairs and maintenance required.

Last, and perhaps cynically, but not to be forgotten, is legalizing the partnership by way of official documentation that will stand up in court!