Managing STR with 50/50 partners

[Taylor Jones]

Hey everyone,

I'm looking at investing in my first short term rental in a saturated market in the Pocono Region of PA. It would be a 50/50 partnership with equal credit/cash coming from both sides. We are considering doing a management rotation since by week since we both live relatively close. 

I want to get the decision making basics out of the way. The obvious problem with 50/50 partners is how do you resolve disagreements. Anything from pricing, renovations, repairs, etc... Also what is fair for personal use? Assuming we get 60-70% occupancy, if one party wants to use it  during downtime, or takes a chunk out of a prime date range, how could that be worked out? I've thought about a flat fee per stay which would otherwise be unbooked and a requirement that they clean or pay the cleaning fee. 

Any experiences or ideas on what to plan for would be greatly appreciated. 

[Collin Hays]

50/50 partnerships are problematic, because there is a constant struggle over who has more say, and who is in charge.  Since no two people have identical goals and risk tolerances, diverging interests come into play very quickly.  Most of these partnerships are borne out of the need for a "security blanket":  Neither of the partners have the risk tolerance nor capital to swing the deal.  And that is never a good situation.

The only partnership I would recommend is a limited partnership, wherein there is a general partner calling all the shots, and the limited partners providing the capital.