Seeking advice for partnership on small multi-family deal.

[Andrew Allen]

Hey all!

This is my first forum post and I'm excited to get more involved with this community! I have a deal opportunity with a partner that I am looking for opinions on. 

The Deal:

- 5 unit multi-family home, all one bed units. 

- Purchase Price:  $250,000

- Owner pays gas/water, tenants pay electric, avg. about $225/month

- Debt service w/taxes and utilities:  $1,850/month. 

- Avg. rent/unit is around $550/unit/month x 5 units = $2,750/month

- Coin operated laundry in the basement. 

- Turnkey property, fully rented, two long term tenants. 

My Question:

What is the best way to structure this partnership? 

I have a partner who is willing to put 20% down but does not want to manage the property at all. My thought is that she would put the money down and I take care of all of the management/maintenance and we are equal partners in the deal. Any repairs/maintenance needed immediately after closing (if any-estimating at no more than $5,000) would come out of my own pocket, but after that the income from the property would pay for repairs, maintenance, turnovers, etc. 

Has anyone done a deal similar to this, and if so, how did you structure it? Any recommendations or ideas on a different structure/type of partnership? Should I take her on as a private money lender instead of equity partner? 

Thank you!
Andrew - North Dakota

[Benjamin Aaker]

Hi Andrew,
Have a look at your cash flow. Using your estimates, your total expenses including debt service is 2,075. That leaves cash flow of 675, which is pretty nice for putting 50k down. Keep in mind, this assumes no loss-to-lease. 
Your partner will have to put 50k at risk in the deal. There needs to be consideration for that. I know that managing the place is work, but your risk is basically 0, and you could walk away at any time. Better to pay you a property manager's fee out of the income. If you are willing to put the 5k into the deal (in a bank account for repair expenses) and she comes up with 50k then you could have 9% of the equity and learn a lot about managing a MF property.