Going in with a partner?

Hey guys! I've been reading the blog for several months but just stumbled across the forum. This place offers a wealth of knowledge! My question is two parts:

1) Does anyone have experience in going in on rentals with a 2nd party? I'm assuming we'd start a LLC and split everything down the middle. I've weighed the pros and cons of this, but any advise/experiences is obviously welcome. At first I was hesitant about this and figured why split profits with someone, but it'd also offer half the risk and twice the investment opportunities.

2) He is currently living in the house we would like to rent out first. What would be the best approach to refi the house in order to have both of our names on the title? If I understand correctly, you can get away with a owner occupied refi vs. non-owner occupied loan on the first house, correct? If so, would we be shooting ourselves in the foot to put the property in the business name?

Any help would be much appreciated!

Regards,
Justin



Comments

  • Hey Justin, 

    Im not really sure how it works as far as the loan is concerned but I just wanted to add to this some of the things I found when researching partnerships as to your question 1).   I live in NYC and will most likely go in with a partner as raising capital to buy in this city is really tough.  From what I read some people give one party more stake so as to make decision making easier and less troublesome   

    Mixing money and friendship is always a hard task to get through because so many things can happen that can lead to arguments, however much of the advise out there is to get an attorney to make a partnership agreement that aligns all responsibilities.   Also there are a lot of other factors to consider. Here is a link to some notes that I wrote up for me and my partner to look over before deciding on going into business with each other.  We already talked some of this through and I can say that I definitely have more confidence having a partner now: 


    BTW if anyone has an answer to number 2) that would also be very helpful to me as well.  Im curious if you could even get a conventional loan if you are buying with a friend.  Me and my partner will probably only have enough capital for 10% down.  

  • I would not use a partner just to share risk. it is usually more risky in my opinion. Too much can go wrong. 

    You are buying twice as many properties, maybe, but you are getting half the profit so where is the benefit? 

    If you need a partner for money that is another story. 

    If you want to refi as an owner occupant they will most likely want him to stay there a year. This sounds like an overly complicated situation. 
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  • Posts: 2

    Thanks for the advice, guys. We ended up deciding against it. You are right, probably overly complicated - especially with him moving out of state for 1 year in a couple months. The most intriguing thing about it was the house is a prime rental candidate in a hot rental market, but we both knew he could sell it for more than we'd agree on for an appraisal to "split". He ultimately wanted the equity now to help put his wife through med school.

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