Question about structure of a multi family partnership

[Jamie Shortridge]

I have found a deal on an 8 unit apartment. I’m currently a flipper ready to hold. I’m not very cash heavy at the moment so I mentioned it to a buddy with money. He wants in and I think our structure is very good. He is busy in a corporate job and had lots of cash. I own a service buisness with 1 employee and can make free time as needed.

$225,000 8 units Cleveland. Class c building and area. 4 are section 8 1 is low rent because he’s the general maintenance guy (for 15 yrs) market rents are higher and our plan is to jump rents $50/mo.

Proforma noi is $37,000 annual actual for 2019 was $32,000 not including taxes or financing but it seems everything else is in there including management fees. We plan to keep the current management.

I offered him 50/50 split if he put up all $60k down and we financed the rest at 4% he then offered to Cary the loan. He would be “silent parter” meaning he would get info but not be the decision guy. He was fine with that. Plan would be to not pull a dime for 1 yr to have a decent maintenance fund. Then hit the loan hard. Then fund out next project with profits.

Both of us aren’t innit for now. We’re in it for growth. And retirement/legacy.

Who has thoughts on pros and cons for me and him?

He understands my knowledge is equal to his money so he feels that would be fair.

We will consult our tax people about depreciation and those liabilities. A llc will be set up through my lawyer. A mortgage will be written on the property in his name.

Am I missing anything else?