First Rental Property - Partnership Equity

[Brian Hagan]

Hey everybody, I have been a Biggerpockets member for quite some time but this is my first time posting. Recently, a good friend and myself decided to venture into the real estate world as partners. Long story short, my family and I are moving and we decided to keep our current home as our first rental property. We have great equity and research shows it will cash flow. The question I was hoping to gain some advice/input on is how to establish my business partner's equity in the property. Not sure on the best way to approach it. We want to be fair to one another. Would we pick a point in time (today) and say all equity prior belongs to me and all future equity is split 50/50? From here on out, we would be splitting all expenses/risk 50/50.  As an example, the property is worth $215,000. We currently owe $135,000, which is 37%. Then my partner and I split the remaining 63% equally, meaning he would have a 31.5% equity position and I would have a 68.5% equity position in the property? Using this approach, it does seem as though I am giving up 31.5% of the equity for nothing. However, does the fact we are sharing expenses/risk now nullify that lost equity? Should he have buy into this equity? Any advice or input is appreciated. Just looking for different options to explore. Thanks in advance.