How Can I Create A Partnership On A Rental Property One Partner Already Owns?
I have a friend who is moving out of town and would like to keep his townhouse as a rental property. We would like to creat an agreement or partnership of some kind to split the ownership of the property in half to share the debt and income. He has a personal morgage on the property. How can we take this property and split it down the middle for a long term investment. Any input would be greatly appreciated.
If I were the Getting partner, I'd want deed for 1/2 undivided interest.*
If I were the Giving partner I'd want a written and signed formal partnership agreement setting out what my & other guy's rights and duties under the partnership agreement.
As most any lawyer could tell you, P'ships are are a great source of law business, because of all the ones gone bad...which could have been largely avoided by good written agreement spelling out all the rights & responsibilities of both/all partners.
*2 separate kinds of deeds for this.
First kind, JTWROS Deed where survivor partner, after death of deceased P, gets WHOLE P'ship interest of deceased P.
Second, where deceased P's heirs, or kids, gets what his/her deceased parent/spouse's interest was.
So both P's need to think about and agree what kind of P'ship he/she wants so it'll work for him/her, BEFORE death of other P happens and chaos ensues.
Actually & legally, unless there's Buy&Sell Agreement built in, death of any partner immediately kills P'ship. I've seen & known of a lot of P'ships close their doors morning after death of P, and NEVER open again.
IMHO, of all the possible kinds of biz entities, the P'ship is the poorest choice and the most problematic. So think this through when commencing business and don't let it catch you in the unawares later on.
John, could this be a good spot to utilize a limited partnership?
I appreciate ya'll taking the time to give me some advice. Tell me more about a "Limited Partnership" and what you have to do to get something like this done?
While I'm not going to write any treatise here on LLPs, I will just say in any LLP, the General P has ALL the say in what's done, and the LP has almost none, so that's pretty rare for a 2 man deal.
See LLPs more in multi-mil RE, with a number of LPs and one pro, experienced developer General Partner, which is frequently a good sized firm, not just one person.
Go through and read the articles and check your library or book store for books on corps, LLCs, LLPs, etc. Lots of authors have written on these legal entities over the years.
Why not have the seller deed the property to an LLC that you both set up that defines the rights, duties, and obligations of each owner.