Purchasing First BRRRR Investment Property with a Partner

[Nick Kendall]

Hi All,

Really excited to have discovered Bigger Pockets and this awesome community! I am a new/aspiring BRRRR investor and this is my first post to the forums. My wife, Morgan, actually got us started on this financial freedom kick (kudos to her!). She started reading articles and discovered the Mad Fientist podcast. From there we also discovered Afford Anything and the BP podcasts, where we realized that we wanted to go the real estate route, while still investing in low cost index funds on the side. Over the last few months we have listened to/read countless podcasts and articles to gain a better understanding of real estate investing as a whole. We both have full time jobs and a 9 month old baby, that we would love to spend more time with in the future by supplementing our incomes. The BRRRR method seems to fit most in line with our goals. We live in Indiana and commute to DT Chicago for work everyday. We are looking to either purchase a single family or duplex in Indiana to BRRRR. We also plan on partnering with a friend to help with initial investment, cosmetic rehab (we plan to do the work ourselves and are not looking to knock down walls or anything major), splitting property management responsibilities, etc.

I am hoping the community can help me out with some questions that I am still trying to tackle.

1) I am struggling with the financing aspect of acquiring a loan with a partnership. Ideally we would like to form an LLC and finance under the LLC. I talked with my lender and she stated that we cannot acquire a loan through an LLC and it would have to go under our individual names. Any way to get around this or any recommendations on how to invest in properties with a partner, while mitigating risk?

2)  Should I just sit down with a lawyer and have him draft up a partnership agreement (both parties 100% want to have something in writing before we purchase our first investment property), or are there any resources on the site/elsewhere that we can draft our own agreement?  

3)  How should we go about drafting a lease for our tenants?

4)  Any other advice/lessons learned with a partnership would be much appreciated.  What am I missing?!  Haha.

Thanks in advance.

Cheers!

Nick

[Adrien C.]

@Nick Kendall Most will agree with @Alex Deacon that partnerships are extremely difficult to maintain over a long period of time. You both have to be on the same page when you start; have the same long term goals; and set up your divorce before you even get started. 

As far as money, most banks will not lend to an LLC unless it's a commercial loan. To get a commercial loan, you need to be in good standing and show income for 2 years.

I would meet with a good CPA or attorney to draft up your business documents. I would suggest the CPA (and I can recommend a good one locally if you need one) because how you set up the entity has a huge baring on how you're taxed. Likewise, I would get a lease from an attorney. A good lease will save you a ton of money if you ever have to enforce it. Again, I can give you the guy I use for leases. Once you have it, you can use it over and over again. 

Finally, attend some of the local investor meetups. There's a really good one in Highland and an OK one in Merrillville.