Eyeing my first property. 4 to 5 partners. Pros & Cons please

[Jamaal Jackson]

I'm eyeing my first property 4 plex that needs some work. I'm also going in the property with 4 or 5 other partners. What are the pros and cons of this approach? Should we form an LLC? What are more experienced investors looking for when making a similar purchase? And information and advice is welcomed. Thanks in advance.

[Scott Smith]

Hey Jamaal,

You would want to establish an LLC with a solid operating agreement and make sure the bookkeeping remains in order on a partnership deal like this. If you don't have any type of liability protection then issues from your partners could risk the property and any issues with the property could splash out and spill over to you all personally. If you establish the LLC if compartmentalizes this property.

You can check out this article on the types of questions you will want to discuss with partners. Whenever I work with clients who are going into a partnership I always have everyone in the deal join the meeting where we establish the operating agreement. This makes is so that the entire group is on the same page (sometimes having one partner who isn't in the meeting can become a problem - they might have questions or read online articles that have differing opinions) and also each person gets a chance to ask their questions. ESPECIALLY with this being the first deal I would recommend doing this - and if you are looking for more partners this can be a good way to find them, since people like to know their investments are as safe as possible. It's just one less thing for your group to worry about.