How To Buy Real Estate With A Partner?

Question

My friend and I each separately own one property in Alaska. Property here is very expensive so buying property as quickly as we would like is less obtainable- not to say that there aren't people who are very successful in this state through real estate investing. We have recently been discussing going into a partnership with each other to take off the load of a down payment, and the rehab. We plan on putting the partnership on paper and making it completely legitimate(50/50 split). What we are unsure of is the actual buying process.

Would we both be on the loan?

Would both of our names be on the title?

Or is everything going to be under just one of our names?

Are both routes an option, but one easier than the other?

Basit Siddiqi · Answer

@Benjamin KniselyThere are normally two ways for multiple parties to own a piece of property.Option 1 - Tenants in Common(aka TIC) - Multiple people are on title.Option 2 - Entity(LLC, LP, Corp, Trust, etc) - Title is held by an entity and there is paperwork showing who the owners are.

Aaron W. · Answer

@Benjamin Knisely You can certainly purchase the properties in both your names. What we did in our partnership was each partner created their own single-member LLC and these LLCs partnered on a parent LLC. You can go further and have the parent LLC own subsidiary LLCs which hold the properties, etc. We did this for liability reasons as we both have personal assets we do not want to risk by putting the properties in our personal names. The parent LLC is also what will be on the loan.

Ensure, however, if you do create LLCs that they are done properly and you do not comingle personal and business. Open a separate bank account and credit card for the business.

Definitely consult an attorney and CPA to ensure everything is set up correctly and legally.

Best of luck!