Buyout Agreement? My 2 partners want to cash out.

[Max T.]

They each brough 25% of the down, 10 years ago. What should I be sure to include in the buyout agreement!?! They are also open to selling it but I want to keep it!

Here is my initial draft:

Buyout Agreement


I. Partners
a. Max 50%
b. Joey 25%
c. Nathan 25%

II. Asset
a. XXXX XXXXX Avenue Philadelphia PA 19125

III. Buyout Price
a. Max will pay a buyout price to Joey and Nathan.
b. Buyout Price will be determined by the asset’s appraised value during the mortgage refinance process. Any partner can dispute the appraised value and order an appraisal at their expense.
c. Appraised value will be used as an Estimated Sale Price.
d. Estimated sale date will be equal to loan refinance closing date.
e. Estimated sale price will be adjusted for normal transaction costs, including but not limited to: 6% real estate agent commissions and ½ Philadelphia Transfer Tax. The remaining amount is the Estimated Seller Proceeds.
f. Estimated Seller Proceeds will determine the BUYOUT PRICE. Joey and Nathan each agree to accept 25% of Estimated Seller Proceeds as their Buyout Price.

IV. Partners will transfer title to Max as sole owner.

V. Debt Restructuring

a. Max will refinance mortgage on 2503 Frankford Avenue in his name only. Existing mortgage will be paid off leaving Joey and Nathan no debt associated with XXXX XXXXXX Avenue.
b. The cash out proceeds from the refinance will be used in full as the BUYOUT PRICE for partners Joey and Nathan. None of the cash out refinance proceeds will go to Max.

VI. XXXX Rentals, LLC
a. Tenants of XXXXX have pre-paid rents and security deposits held by this entity. Those amounts will be transferred to Max.
b. All remaining assets held by this entity will be split among partners according to their percentage of ownership.
c. All accounts will be liquidated, distributed to partners according to their ownership percentage, and closed.
d. Partners will continue to cooperate after closing to dissolve XXXXX Rentals, LLC as a corporate entity.

[Theresa Harris]

Did you write that into the agreement at the time you bought the place?  If so, what did they get in terms of profit?  I think what you wrote sounds very reasonable.  Have all of the loan payments and taxes been covered by the rental income?  

Don't forget taxes, insurance and any other expenses when transferring the funds from the account to you upon closing.  You may want to look at the initial purchase and see what expenses your lawyer transferred to the three of you and the original seller when you bought it.