Buy and Hold Partnership question.

[Paul Lichtenauer]

I'm trying to figure out how to structure this partnership. I found a great SFR buy and hold deal. My buddy is going to take out the loan in his name. I will manage the property. Do we set up a property specific LLC and buy the property under that? Buy it under his name and quit claim it to the LLC? Other options?

[Scott Smith]

@Account Closed is correct: even the happiest of partnerships get very messy without clear, upfront documentation. Agree on everything ahead of time and get it in writing.

You could structure the deal in a number of ways. A venture-specific LLC is a great idea, and I've written recently for BP about how to protect yourself in these agreements. Many of the comments there about Operating Agreements also apply to Partnership Agreements.

One issue you may consider when deciding between these two approaches is whether you need financing. It's easier (and cheaper) to get financing in your own name than it is to convince a lender to make a loan to your LLC. This is particularly true if your LLC is new. Incidentally, I've written about how to get around the due-on-sale clause you'll find in most mortgages with a few strategic moves here on BP as well. I hope this information helps you out!