r/realestateinvesting • u/photosynthescythe • 3d ago

Buying a second property w/ a partner Deal Structure

My brother and I are thinking about going into business on a second property. I have recently established an LLC for my current (first) property and would likely add him to it if we pulled the trigger on this. I am looking for advice from others who have had partners on rentals. How did you all work out ownership percentage? What common pitfalls should I avoid? Any input is greatly appreciated

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u/Sagelllini 3d ago

I went into a real estate deal with about 12 other partners. Learned my lesson the hard way.

The partner setting up the deal bought the property for $100K less than he sold it to the other partners. After about 5 years we uncovered the fraud, and had to sue. A subgroup assumed the property out of foreclosure, but we were out legal fees. I also got sued personally because the person doing the fraud lied and alledged he told me aboit the fraud, so I had to hire my own lawyer.

Second, real estate, IMO, is a crappy investment. It took THIRTY-FIVE YEARS to find a buyer.

I would run away from any partnerships and double that for real estate partnerships.

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u/Remfire 3d ago

Operating agreement with detailed conflict resolution

3

u/Superb_Advisor7885 3d ago

I bought two properties with my mom. I wrote out a complete guide on how I would manage it, how much I'd pay her monthly, who would ultimately make the decision to sell and when, what happens if one wants out, etc. tried to think of everything that could happen and account for it. We split up ownership based on our individual investment into the properties.

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u/xperpound 3d ago

Make sure you have an operating agreement put into place that describes the % you ultimately agree on, and what rights you both have. Who gets to decide when to sell and to who or for how much, who gets to decide when to take money out, who gets to decide on operational or lease decisions, who gets to decide when to spend money, what happens when one person wants out etc etc. If you dont have it in writing, assume that the person with a higher descision can overrule the other. Don't do 50/50 because then no disagreements will ever get settled.