Buying properties with a friend.

[Alan Chambers]

So a friend and I are ready to buy some fix and flips together. Where can I find info on how we set this up and what we need to have in place regarding paperwork etc. Do we need to form an LLC together, should we open a joint bank account together etc????

How does this work as a proper partnership so it’s all correct? Any good books out there?

[Owen Dashner]

@Alan Chambers, you are talking about starting a business together with a friend.  Treat this the same way you would any other type of new business, whether it be a grocery store, auto repair shop or landscaping business.  Step one is to put a business plan and operating agreement/memorandum of understanding together.  Clearly define who has what role and what financial and day to day responsibility each of you has.  Define your goals and put plans in place to achieve them.    

Research and define your geographic marketplace, your marketing plan and budget for generating leads, your sources of capital for both operating expenses and funding deals.  Do you have a "team" of people that will handle the various specialized aspects of a house flipping business (Realtors, CPA's, attorneys, contractors/tradesmen, title companies, lenders, etc.)?  If not, you need to start networking to get some good referrals.

Get advice from an attorney and CPA on how to best structure your business entity based on your individual and collective situations. Lots of people that own and operate house flipping business opt to structure either an S Corp or LLC taxed as an S Corp, but you have considerations like drawing a "reasonable salary", self-employment tax, etc. You need to talk this through because everyone has different life and tax things to consider.

I am sure you have already been advised to not go into business with a friend, so I won't waste time mentioning it.  But, my best advice would be to go through a thorough planning process and really put thought into your plan for achieving your goals.  Do NOT just treat this like, "Hey, let's go find some houses and flip them together to make some money", because that is not a plan or an actual business and is likely to lead to a damaged relationship with your friend.

Good luck to you!

Owen