Question about splitting up a partnership.

[William E.]

you always hear:

• "don't start without a plan"
• "make sure you have everything in writing"
• "don't get involved in business with family/friends"

yea yea.. i'm in a situation. It won't happen again, but in the mean time, i would like to see what other useful options/opinions are out there.

I purchased a house with a close relative. 50/50 (cash) a few years ago with a simple plan to fix/flip/rent/whatever with.

we each invested time and money to rehab and rented for a few years. fast forward 4 years. Property value tripled, my life situation changed (marriage/kids/etc). I want to cash out, they want to keep renting.

i suggest them buying me out so i can put the money into other investments......6 months later they still don't want to refi, to pull out equity, or take another loan, or... because it will cost money, also they don't have the money in the bank. 

• what are some suggestions to motivate this relative into a forward momentum? 
• also what tax implications would i have for relinquishing my 50% in the property for cash (assuming i ever get it)?
• do i just need to call the title company to get my name removed from the title?

[Ryland Taniguchi]

This partnership scenario is actually very common and I have been on the opposite side of it where I prefer to rent rather than cash out. 

Some ideas:

1) Find another investor who wants to buy out your interest for cash. Have an attorney prepare your documents. In my state of Washington, one has to pay an excise tax to transfer 50% or more ownership in a property.

2) If you bought the property together in an LLC, you could buy out their ownership interest in the LLC. Again, in my state that would trigger an excise tax.

3) Get an 8% private money loan. Not sure who owns what and what is viable based on LTV.

4) Get written permission from them to use the property as collateral for borrowing on another house. 

I have been on the opposite side where the plan was to hold the property and had a partner who life circumstances change i.e. their daughter is getting married and they want cash, they lose a job, or their credit gets ruined and then they cannot refinance. So you maybe annoyed by the circumstances but they maybe more annoyed.