Structuring a house hack partnership

[Colin Mills]

Hi all,

I am moving out of my current rental apartment in order to pursue a house hack. My landlord worked with me to help re-rent my current lease so that I would be free to go and buy a house. She was impressed with the plan and analysis I have put into the search so far and asked if I would want to partner with them on this first deal. I had not been considering a partnership, but I am keen on the idea because this could be a great way to reduce risk and come up with the down payment on my first deal.

Some key points of how we would work together:

- They want an equity partnership, not a debt partnership

- They live out of state and want to be mostly hands-off while I live in and manage the property

- They have decades of landlord experience and connections that could help me get started/mentor me

- Pursuing a 3-4 unit multi-family 

- I would live in one of the units, decreasing total rent revenue

- We would be getting an FHA loan

- We are in a market that would likely be cash flow negative for a few years (with a low down payment and high-interest rate)

The question stands, How exactly would you structure this partnership?

Some possible ideas I have thought of:

- I contribute the fair market rent for the unit I live in towards total revenues. If we make cash flow, after vacancy, maintenance, and capex reserves are filled then I take a 10% management rake before we split profits along the equity proportions. Also if I decide to rent out a room in my unit then that money is mine to use how I want.

- I don't contribute towards revenue from my unit and we split profits/expenses along the equity proportions. My management rake is effectively living for free. If I rent out a room, that also gets split evenly.