Looking for ideas on partnership investing

[Christian Sirio]

So I have a partner who is willing to put up the money for the down payment on the deals I find and also rehab costs. We’re going to split profits 50/50. What would be a great/best way to do this? As I am a newbie with a golden opportunity and I’m seeking expert advice. Please let the knowledge flow. Here’s the curveball, he doesn’t want his social attached to the house. It’s basically my info going on the mortgage and he supplies the cash for everything.

[Daniel Dietz]

My 2 partners and I do this. We all had between 1 - 9 rentals on our own before we started investing together thought too, so we fit 'the experience' part of it. We went to a local 'savings and loan' (credit union would be good too)... the key here is LOCAL.... as in they will keep the loan 'in house' so they are not as locked into someone else's criteria. About half of the members of the Board at this bank are also investors, so I am sure that helps as well.

As far as the paper work, whether to be LLC, JV, etc... we knew we were in it for the long run, so went the LLC route. We also have very specific buy out provisions that cover us and our heirs, whether they wish to stay partners or be bought out.

The summary of our buyout is this... .say we bought a duplex for 100 times rent - meaning 150K for a place bringing in $1500 a month. That is our 'multiplier number'. Fast forward say 10 years and one partner wants out. It is now renting for $2000 per month, so the new 'value' as far as a buyout goes is 200K. The other partners have 'right of first refusal' at that price, and if they do NOT want to but out, it could be sold and all profits split according to % ownership. 

Hope that makes sense.

Dan Dietz