Partnership advice — Looking to do a deal with a friend

[Leonard Qendro]

Hi everyone,

My buddy and I are looking into investing in a rental property together. We're wondering what the best way to go about it is. I'm more experienced than he is in real estate investing. However he has a better job with higher income that will qualify us for a larger loan and a better rate.

We're considering putting 3.5% down on a house that we both co-sign on the loan and split the deed 50/50, along with all other expenses and profits. One of us (either me or him) will live in the property for the first year, and either rent out the other rooms or rent out the other units.

I'm wondering what the best way to structure this is. Can we both co-sign on the loan? Should we form an LLC or LLP?

A lender told us that it would be best if only one of us was applying for the loan, and that we should create another contractual agreement between us to split costs and profits.

I've never co-signed with a friend before and would appreciate all advice that you have.

Thanks!

Leo