Analyzing a pitch for partnership!

[Neal Hassel]

Hello BP Community! 

A longtime friend of mine just bought his second residence; his first house is a rowhome and if he were to sell it right now he would have to take a loss. He wants to rent it out until it is a good time to sell (or longer), but wants to avoid covering two mortgages at once. 

That's where I come in; he's put together a pitch with some key information about the property, and asked if I would partner with him. 

This could be a great opportunity for me, but I'm not sure where to start.

What are the critical items I should consider, and what questions should I ask to determine if this is a good investment or not? 

Owner Current Equity: $46,000

Scenarios for partnership: 

1. You give me $23,000 and in exchange now we both own $23,000 in the house. Split everything going forward. Equal Equity. This is by far the easiest and most straightforward option, but requires you to part with a decent chunk of change.
2. Build equity over time by outweighing my contributions going forward. If we don’t have a renter, you’d cover the mortgage. If we need to make a big repair, you’d pay for a higher percentage. There are tons of ways to do this. It will take a lot longer to vest yourself. We would keep a running tally of everything. If for whatever reason, we want to sell, and you are not vested, we would split profits accordingly (for example 70% to 30%).
3. You put $46,000 into the house. This could be done in cash towards principle (lowering our payoff time) or in updates and maintenance. Or in any combination of the two. This option is probably the best option as far as our investment goes. But it is also the most unrealistic, unless you happen to be sitting on a ton of cash.
4. Non-Equal Equity. If you wanted to own a portion of the house, you could buy-in with any of the options above but at a percentage. It probably wouldn’t make sense to be in less than 33% but while I’d prefer a 50/50 partner, this is something we could consider as well.

I've also recieved a detailed list of updates the property needs to be rent-ready, as well as cost of mortgage, utilities, water, property tax and his purchase price, loan amount, and interest rate. 

Thanks in advance for your feedback!