The legal side of an equity partnership

[Tyler Faison]

I’m looking at going into a deal with someone that already owns a piece of property. We are essentially supplying the tenants in exchange for equity in the property as opposed to a percentage of the income. We have a few other reasons to do it this way as well.

My question is simply, is all I need to do is have them add us to the deed and an attorney provided contract of the terms? Is there anything else you have found to be prudent in equity deals, paperwork or otherwise? We’re all in Texas FWIW.

[Ryan Seib]

If the property is owned by an entity such as an LLC then get equity in that entity via an increasing ownership percentage. Make sure you have an attorney look over the structure though to make sure you are not on the hook for the acts of the other owners (partners) in the deal. Also make sure you have minority rights since if you own a small part of an entity you may not be able to vote to liquidate property if you want to be paid out and leave it.