Structuring a Partnership

[Nicholas Anderson]

Hi Everyone,

Can anyone recommend a few resources around structuring partnerships for the purpose of buying and holding real estate? While I can bring in a money partner on a single-family home purchase, I’m hesitant to pursue this route without fully understanding how other experienced investors are structuring their partnerships. For example:

• -How are the expenses shared?
• -What if the expenses and repairs exceed the excess cash in reserve?
• -Do you fund a cash reserve account as a “just in case”?
• -How often do you pull your cash flow out of the operating account and into your personal accounts?

Thanks,

Nick

[Ryan Johnston]

@Nicholas Anderson Yes, sign a partnership agreement.  Something that outlines the scope of your agreement.  When I spoke to my CPA, he basically said to track all expenses, and distributions.  Literally everything.   i.e. Let’s say we have $10,000 in reserves, my partner wants to withdraw half (which they would be taxed on), but I don’t want to do a withdrawal.  A year goes by, and our reserves are now built back up to $10,000.  If we called it off, I would be entitled to $7500 of this ($5000 of the original amount + $2500 (50% of the $5000 we made in that year).  Could get confusing pretty quickly, without recording correctly.