Transferring Owned Investment Property into Partnership

[Brent Jones]

I currently own a single family residence in Chalmette, LA which I have been utilizing for short term rentals.  Prior to the COVID-19 pandemic this property was bringing in between $3,000 and $4,000 per month in revenue.  My average monthly expenses on the property are between $1,500-$1,700, so I was getting pretty good cash flow.  After the pandemic, I have been averaging around $1,700-$2,000 per month in revenue which has made the property more of a headache than a sound investment.

My current mortgage rate is around 4.5% and I'm paying PMI, I have a potential partner I'd like to bring in to invest around $15,000-20,000 into a refinance on this home with the current better interest rates available. This would drop the mortgage payments considerably and eliminate the PMI thus making the property profitable once again.

The thought process for this partnership would be that his investment brings us in as 50/50 partners on this property and then we would like to continue to grow our portfolio together. My questions really surround the best way to structure this partnership and how to handle the mortgage. I currently have a conventional home mortgage on the property and even a homestead exemption. In conversations with a mortgage company, I was advised that the best way to do this would be to receive the money as a gift from my partner and refinance the mortgage conventionally in my name, thus allowing us to benefit from the conventional mortgage rates, then create an LLC for our partnership and transfer the title into the name of the business, open a business bank account and run all expenses/profits through that LLC. Does this seem like a reasonable path forward? Any specific downfalls to this plan or suggestions as to a better path forward?

Thanks in advance for any advice you have to give!