Partnering with an investor, Any advice?

[Brett Deas]

I am looking at purchasing an SFR but do not have the funds myself to afford it. I am looking to partner with a family member who is willing to provide the capital for the initial purchase. I know it is a good deal but does anyone have any advice when it comes to structuring the partnership? What extra things will I need to prepare/complete in the transaction for this situation?

[Drew Sygit]

@Brett Deas 

When partnering with anyone, but especially family & friends, you want everything in writing. Otherwise, you may not be welcome at family events!

Too many investors want to partner with “handshake agreements”, which they would never do with a tenant or property management company.

Things to think about:

1) What happens if one of you is suddenly incapacitated or dies? Do the surviving partners get that investors shares or do they have to deal with relatives that may be ignorant and/or greedy?

2) What happens if one of the partners wants to terminate the business relationship and wants their investment out now?

3) What happens if one of you drinks & drives, killing someone and getting sued by the victim's family? How would the other partner(s) be protected from that?

So, why wouldn't you want to hire an attorney to create a partnership agreement and perhaps an LLC to cover as much of the above as possible?