Add a partner for equity in exchange for cash

[Brandon Eleazer]

hello BP,

For those who've owned rental property outright...here's a scenario:

Single family 3 BR currently rented for $1150 per month.

Purchased cash for $50k + $12k to fix it up. With settlement fees and insurance the total all-in cost is $70k.

Would like to tap into the $70k cash invested either through a lending institution (mortgage, line of credit, etc) or taking on a third partner (already owned by two individuals)

Under what terms would it make most sense to add another partner?

I was thinking a $40k buy-in, in exchange for equal (1/3) partnership. This is under the condition that we will cash out refi shortly after and the partner will immediately get back up to $20k of the initial $40k....so in essence we will end up equal owners with a mortgage on the investment property and the new partner only really is out of pocket $20k.

Is this way too off base or somewhat of a realistic scenario? Thanks!

[Account Closed]

@Brandon Eleazer  I definitely think you made the right move. From my limited experience, successful partnerships are based on sharing the same vision and goals.

My situation is as follows:

My wife and I have built up a small real estate porfolio consisting of 12 units across four properties. As our ability to purchase on our own dries up, we are seeking equity partners for new deals. During this search I have attracted an investor who, rather than partnering on a new building, would like to purchase an equity stake in our exisiting portfolio. It is a very attractive proposition and I am looking how to best structure the partnership / equity buy out. Any thoughts, advice or recomendations?