Handling Unexpected Costs in a Partnership

[Dan Buchta]

Hi All,

I'm pretty new to REI but I was wondering how most people who have done partnerships would handle a large unexpected cost in a rental property. Here is the example that I'm thinking about:

I get that partnerships can be formed any way that we agree upon so I guess my real question is, how would someone protect themselves from this sort of situationn? My initial thought would be to have some sort of clause in the partnership that says we split all required operating repairs over $1k but I would love to hear other people's thoughts.

[Kim Meredith Hampton]

@Dan Buchta depends on how you lay out the operating agreement, all and I mean ALL things need to be laid out from the beginning so that there is no chance that you ruin family or partnership relationships. Good to have an experienced real estate attorney prepare your operating agreement, they will guide you through all the good, bad and ugly that can arise during the operating of the property. 

Because you both are 50/50 and they put up money and you are performing good will by managing, you both should split the expense.