Rental Property Partnership

[Jessica Piff]

Hi BP,

My husband and I want to find partners to build our rental property portfolio. I’m curious about the structure of partnerships when it comes to rental properties.

Specifically if someone else is financing the deal but we will be doing the work.

Basically any information on the different structures and what they entail is greatly appreciated! 

[Daniel Zapata]

@Jessica Piff it sounds like you are looking to be a sweat equity partner. Disclaimer, I'm not an accountant/lawyer and you should check with yours before pulling the trigger on anything.

I had a similar situation where I was bringing in the money and someone else was putting in the sweat equity. Assuming you're looking to do a buy and hold: one of the simpler structures is a Joint Venture where your money partner buys the property in their name and they pay you like a contractor and issue you a 1099 at the end of the year. Another option is to set up an LLC where you define the percentage ownership. There is some special terminology for sweat equity partners in an LLC which would prevent triggering a weird tax event since you don't have any money in the LLC but are eventually getting something for it.

Always get everything in writing, including details on what happens if you want to sell, someone dies, etc.

Good luck!