How are RE partnerships usually set up? (ie, are profits split 50/50 between the cash partner & equity partne

I have some money in the bank and am thinking of parntering with an active real estate investor to buy / flip / rent small homes and apartments. The investor is saying I should put up 100% of the money and he will do 100% of he work. It sounds great, but he's not in a position to guarantee any losses (in the event there's a loss - which, hopefully there won't be), so I'm thinking maybe I should ask for more than 50% of the partnership interest in exchange for absorbing 100% of the losses. Also, what if we buy a house, fix it up, and then it doesn't sell. I want to sell it for a loss and he wants to sit on it until a buyer comes (or vice-versa). I'm guessing one partner typically has the ability to trump the other in order to avoid stalemates. And then what if we buy a house and he just does nothing with it (ie, I'm totally dissatisfied with what he's done with the property)? What's my exit strategy?
In Buying Property - Asked by Charles P. - Sep 15, 2011
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Answer(s)

John B.
Broker/Agent
Las Vegas, NV

It sounds to me like you identified most of the major "gotchas." There is no "usual" on such a partnership, so, it is all about what you both negotiate. I am wondering though, what work is the investor going to do for you? How much is it worth? What kind of returns are you expecting from these investments? I'm plugging my own market and services now but what if you bought single-family homes, apartments, or other commercial property in Las Vegas without a partner? I could find you appropriate investment properties, set you up with a property manager, and you sit back and collect the cash all without a partner to eat into your profits. You may want to weigh that option.
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John A. Brassner, MBA, REALTOR®
Residential and Commercial Realty
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Prudential Americana Group, REALTORS®
10777 West Twain Ave, Suite 333
Las Vegas, NV 89135
Cell: 702-808-9816
Fax: 702-995-0488
Email: John@NevadaCommercialSales.com
www.NevadaCommercialSales.com
www.HouseOfVegas.com

Sep 15, 2011
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Alex A. G.
Broker/Agent
Miami Beach, FL

There's no "standard" for partnership structures. The most sound structure I have done is for every partner to have some skin in the game, divide the profits proportionately up to a certain return (say 10%), give the operating partner a promote, and if there's anything left divide it equally. Be careful who you partner with, especially if they are asking you to fianance the whole thing and assume all the risk. You are better off owning the whole thing and entering into a management agreement.
Alex A. Garcia

Sep 16, 2011
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Adebo F.
Owner/Investor
New Castle, PA

Very Easy: There are never any standard steps to write a partnership operating agreement. The best agreements are written with all the partners' concerns placed on the table and corrective plans/actions stipulated in the agreement to deal with those comcerns. For instance, one concern you stated was a fixer upper that did not sell in time. The solution to that is to put in your partnership agreement what your acceptable wait time should be. If after 30 or 60 days, property hasn't sold, you have the right to sell it at your own price. Another concern you stated was what if you purchase a property and he doesn't do the necessary repairs. Again, the solution is to put a writing in the agreement that all work MUST be completed in 30-60 days or whatever time you consider acceptable to you. And if not, you will have the right to higher someone else to complete all repairs and you keep all the profit upon sale. Make sure you think up all the concerns that you may have, and have stated comfortable solutions for your part of the deal. I hope this help.

Sep 19, 2011
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