Partnership buying question

[Matt Liu]

I am starting a partnership with a friend where he found the deal and will do the work, while I put up all the money. The issue is he has to initially buy it in his name because he is doing a shortsale. How do I protect myself between the time the deed goes in his name, and the time he quit claims it to the LLC we created with an Operatinf Agreement which acknowledges my captial contribution? Do i need an interim partnership agreement which says I own 50% of the property until it is put in out LLC? Or should I record a temporary note and mortgage with my partner?

[Reed Starkey]

Originally posted by @Chris Martin:

I highly recommend you seek the correct legal representation for yourself in this project. I am 99% sure you need it.

I agree with Chris 100%. Never get involved in any partnership without discussing the details with your attorney. If you do not have one...get one.

Is your friend experienced in this sort of work?  If so, what is his time frame?  Make sure he is capable of doing the work in a specified time frame.  Make sure you have control over the project at all times. (your attorney can help here)  You want to have the ability to remove him from the partnership if he does not perform.  Otherwise, if he looses interest, and walks away. (he can since he has no skin in the game)  You are dead in the water without the proper protection.

This can be a profitable proposition, or a very dangerous one.  My first deal was very similar, and I lost $40,000 on it because of those same mistakes.

Good luck!