Need help developing a partnership agreement

[Harsh Singh]

Hello,

I have diligently been working for the past few months on identifying a multi-family investment in Houston and I have finally found a good deal. I've been working informally with a financial partner who is also interested in this deal.

I was hoping to get advice from the community on how I need to establish the partnership agreement. 

The property is a 6-plex and it will cash flow $29,207 per year, with a $117,453 back-end payment upon refinance or sale at the end of year 5. 

I would like to have a 3-way partnership, and the total cash required at close per investor would be $31,103. 

How should I setup a partnership with these numbers and what are some good resources for finding multi-family specific partnership agreements.

Thanks,

HS

[Lennon Lee]

Congrats on getting this deal Harsh.

First things first, you should be talking to your attorney and your CPA for legal and tax advise on how to best structure your deal according to what you agree with your partners.

That being said, the structure of a deal can take many different shapes and forms and it will vary according to the type of involvement the partners will have in the deal.

Are you in charge of putting together the deal, securing debt, managing the operations? how about your partners? Will they be actively involved in the deal as well or are they just bringing part of the equity and putting it in your hands with an expectation of a financial return? The answer to this questions might determine if you need to be talking with an SEC attorney given that you might be dealing with securities.

If everyone will be actively involved and will have different responsibilities in the deal then the structure and compensation for each member of the partnership can only be determined by you and your partners. Only you know how much value each one is bringing to the table. Maybe you found the deal, secured the debt, and then brought the opportunity to your partners and you will all be managing the property. If that is the case, then you might consider including a small acquisition fee for all the up front effort of sourcing and securing the deal.

With limited info (and even with all the info) I can only tell you that it ultimately depends on what your goals are, what you think is fair and on what your partners are aiming to achieve out of this deal as well.

Again, talk to your real estate attorney and your real estate CPA and have them advise you on the best structure to move forward.

Probably not the straight up answer you were looking for but I hope it helps.

Good luck!