Buying an investment with a partner

[CT Nguyen]

Hi everyone, I'm considering purchasing an investment property with a partner, who I used to work with at one of my previous jobs but we keep in touch over the years. I have 2 other investment properties that I bought myself so this would be my first time trying to buy with somebody else. Reason being I don't have enough money for the down payment (25%). So I would bring him the deal, perhaps offer to manage the property as well since I live closer to it, and he would bring the money. I would appreciate some advice on how to split the monthly rental income? Shall we split 50/50 even if I can't contribute anything for the down payment? And if we sell it, assuming we should split 50/50 as well on the profit if that was the original agreement?

Any advice would be very much appreciated!

CT

[Will Fraser]

HI @CT Nguyen, I think you're spot on with the idea of splitting the cashflow 50/50, and here's how I would specifically define that for the sake of your partnership (and what I follow with mine)

Cashflow = Gross Rents Received - tax proration - insurance - P&I payments - Repairs budget - CapEx budget (if separate).

The resulting cashflow is split evenly among the partners, as is the equity from the sale (when it eventually sells).

One key thing for all partners to understand is that cashflow is only one lever you can pull in real estate investing and, depending on how your partnership is structured, you may also be equally sharing the tax benefits, appreciation, and additional principal created through debt paydown.  Remember these levers and celebrate the fact that both partners can participate in them, though separately you might have both had 0% of these benefits.