How to structure partnerships

[Jacob Muniz]

Hello BP community,

I would like to know if anybody could provide insight on how to go about entering into possible residential real estate purchases with partners or entirely using OPM. I acquired my first two properties in Ohio last month, and want to help the team I have built there by bringing them more business! I already have networked with some high-net worth/high income individuals that have shown interest in a partnership.

Would it be reasonable to structure a partnership where I use someone else's capital to acquire properties and put them in other peoples names or sell them (like a turnkey property)? I am thinking of something other than simply using 50/50 capital to purchase and receiving 50/50 income from the property. Please let me know your thoughts! 

[Jason Marino]

Hi Jacob,

There are multiple different ways that you could go about creating the partnership that you described in your post. A common method of doing this would be to create a Joint Venture Agreement. This option is probably the least expensive, but additionally the least formal. It will help avoid and control internal disputes between you and your partner. However, it will not provide any asset protection if there is a lawsuit by a party outside of the partnership. Another option, the more expensive and the more formal way of proceeding, would be to form a limited liability entity and incorporate the partnership language into the actual formation documents. This is going to provide guidance on the internal disputes between you and your partner, but it will additionally provide asset protection.