How to Structure a Multifamily Deal Partnership between 3 people

[Nick P.]

Hello all, I am looking for ideas on how to structure a real estate partnership between 3 people. We have worked together successfully on flips, development, and I have managed apartments for the other 2 individuals for several years. That’s to say, we get along well personally and in business.

We currently have a deal under agreement:

5 Unit apartment building

2 partners are bringing the down payment ~$150k.

My duties (3rd partner) will be:

All Property management duties including placing tenants, coordinating repairs, capital improvements, turnovers, & doing occasional labor myself. I also meet the sellers first and work to vet and secure the deal.

I am trying to figure out a way to structure the partnership since I am bringing no money to the deal but doing the bulk of the work. Alternatively, I could bring some cash - 10% or so.

We plan on buying larger buildings together so we are trying to create a fair way to structure this that will make us all feel good about it.

Things to consider:

• Equity split
• Cash flow disbursement - initial and overtime
• Refinances
• Tax benefits
• If property is sold or partner wants out
• After a certain time period do property management fees or hourly charges kick in ?

Thanks for reading and looking forward to some ideas and discussion.