How to structure a partnership deal?

[Jonny Morris]

Short and sweet... Just connected with a local investor and looking to partner on a deal. I have a HELOC (cash) ready to go. He will probably get a loan. Going in 50/50 on the purchase and rehab. Strategy is BRRRR. We’d both purchase through our LLC 50% each. Thinking use a joint account between us to collect rents and hold funds for repairs and cap ex funds etc Any thoughts on how to structure?

[Jerry W.]

@Jonny Morris, just off the cuff, first set up an LLC with both of you as members. Have a very thorough operating agreement. I mean very thorough. Have for, who puts up the money, how much, who does what work, who does work you didn't think about, who does the books, what happens if you need more money than you thought? What happens if one of you does not do what you were supposed to do? How do you break a tie if you disagree? The big one is how do you end the deal if it goes bad? what if one of you dies or becomes ill and cannot do work? How do you split profits if you dissolve it? What about the doctrine of opportunities? If a new deal comes up does it have to go to your LLC or can one of you do the deal and exclude the other? What about a deal far away? What decisions can be made without consulting the other person? What will you do if you cannot contact the other person? There are a ton of things that need to be set out now, so they are not as big of a problem later.