My Brother wants to invest

[Gabriel Benavidez]

ive been investing a few years now i only do rentals and my brother has been wanting to do the whole real estate thing with me and wants to give me about 10-15K to go in on a property so basically he wants to lend me some money and ill put in the rest of the 20% on a house that's about 120K-135k. My question is how this going to work? Does he get a percentage of the cash flow? How would you guys do this partnership and what terms will you guys agree on.

[James Ma]

Well typically you'd want to get a lawyer involved to draw up a contract, since he's your brother I'm not sure if that's what you want to do but regardless you need to agree on the terms of the business relationship beforehand to prevent any disagreements and disputes:

1) Who makes major decisions (ie renovations, evictions, selecting tenants, etc.). Since you're experienced I would say you should have full decision making capacity and he would be a silent partner

2) How long you are going to keep the property for (or terms that would trigger a sell such as appreciating 100% in value) and if someone wants to sell their portion, how they will be reimbursed for it (who pays realtor fees etc). When selling, you can put on the market to see what it would fetch if one of you wants to sell and that would be the buyout amount required to prevent the sale from happening and buyout equity from the other partner.

3) How cash flow will be handled. Will it sit in a reserve for emergency repairs or issues? Or will it be paid out to each party and when. I'd build a reserve fund and once that is met, would payout cashflow each month to partners

4) Who handles the day to day operations and support of the tenant? Is there any additional fee that would be charged to compensate the individual for their time? If you're looking after everything, I would charge a fee typically but since he's family you may want to waive.