Organizing a 50/50 Partnership for Our First Rental Property

[Jacob Ruppal]

Hi there! I've had a question on my mind lately about how to organize an equal, two person partnership. My significant other and I are interested in purchasing our first buy-and-hold rental property this year. We are currently not married, which unfortunately complicates this a bit more. We are planning to both sign the mortgage for any property that we purchase and we both would contribute equal amounts of capital to the deal. This part seems straightforward enough, but we aren't really sure how to manage any income, losses, or expenses that would occur as a result of us owning the property come tax season.

My first thought was to organize a two-person LLC with an equal split just to simplify the finances - with any proffit or expeness split 50/50 and taxes passed on to the individual members. However, it seems that purchasing a property as an LLC presents some challenges (primarily with financing). Can anyone speak to the process of purchasing a property via an LLC? My impression is that all members of the LLC would have to go through the underwriting process individually (that is, if the lender will even lend to an LLC in the first place, which it seems like many won't).

Are there other ways to accomplish this typ of partnership without an LLC? Could we just keep track of the proffits and expenses ouselves and each report our share of it on a 1040 schedule E come tax season?

PS - apologies if this isn't the correct forum for this question. I wasn't quite sure where to post it since it encompasses a few different areas (partnership structure, taxes & accounting, financing, etc.) but will happily repost it elsewhere if needed.

[Jacob Sampson]

You are pretty much there. My business partner and I are 50/50 ownership stake of our LLC. We split all expenses and profit 50/50. The bank won't loan the LLC anything. The LLC will own the property, meaning be the name on the title (if you want it that way). The bank will require that all partners personally sign for the loan. So the LLC owns the property and you guys will personally own the debt.