How To Structure Partnership that allows GM to own 100% if Re-fi

[Allan Smith]

Many times, I have brought in a partner on rental properties to pay the down payment and sign the loan. If I put a deal together for this 5-unit package, and I want to take full ownership and cash-out my partners some day down the road with a cash-out re-finance from the bank, what's the best way to structure that?

I would love to hear from folks who have done deals like this.

Here's what I've tried so far:

1. Partners wanted to sell a duplex we had bought together 3 years prior, but in order to give them a market value price to buy their 50%, I would have to carry a loan too big to make the cash flow worth it. Basically, giving them market value was too expensive for it to be a good rental.

2. I put in the partnership agreement on a 9-unit I "syndicated" that I can buy them out by paying them compounding interest of 14% first year and 9% each year after. Without seeing it at the time, this is on top of the return they are already getting from the property, so this is extremely expensive. Maybe I should try again at a lower rate?