Need advice for joint venture

[art2012]

Hello Everyone,

Not much activity it seems in this section lately. I hope there are lurkers out there that won't mind offering some wisdom thru experience to the discussion.

My friend and I want to l buy a 4 unit building. We want to live rent free. We have 30K each to put down on the purchase of a 4 unit (for a total of 60K), I would live in one lower unit, he would live in another. We want the renters in the upper units to cover the mortgage. I have yet to figure out where that leaves us as far as purchasing power. We might be able to pump in another few K if it means a better area. Not interested in buying a building in a trouble area..sorry, I'm not a pioneer or a trailblazer.

My real question is how we should proceed into a partnership. I want to have all angles covered as far as responsibilities and exit strategies are concerned. The first 4-unit is a test. If all goes well, we might be up to buying another..and so on. We have some quality friend-level connections in the construction trade who we could farm out anything we could not handle ourselves as far as repairs. My friends parents are deceased and was left his family home, and he wants to sell and go into this joint venture. However, he has no 9-5 job. He is a painter by trade without health care and works. That point is the most unsettling to me. If he puts 30K into this venture, that will leave him with about 40K cash to bank. Now my thoughts are what if, God forbid, he has some sort of health issue and has to rely on that money. I'm just trying to think of all situations which would cause one or the other to leave, and what the other would do. I was thinking of forming a LLC, for liability reasons. Any input?

[Save Us]

Hello Everyone,

Not much activity it seems in this section lately. I hope there are lurkers out there that won't mind offering some wisdom thru experience to the discussion.

My friend and I want to l buy a 4 unit building. We want to live rent free. We have 30K each to put down on the purchase of a 4 unit (for a total of 60K), I would live in one lower unit, he would live in another. We want the renters in the upper units to cover the mortgage. I have yet to figure out where that leaves us as far as purchasing power. We might be able to pump in another few K if it means a better area. Not interested in buying a building in a trouble area..sorry, I'm not a pioneer or a trailblazer.

My real question is how we should proceed into a partnership. I want to have all angles covered as far as responsibilities and exit strategies are concerned. The first 4-unit is a test. If all goes well, we might be up to buying another..and so on. We have some quality friend-level connections in the construction trade who we could farm out anything we could not handle ourselves as far as repairs. My friends parents are deceased and was left his family home, and he wants to sell and go into this joint venture. However, he has no 9-5 job. He is a painter by trade without health care and works. That point is the most unsettling to me. If he puts 30K into this venture, that will leave him with about 40K cash to bank. Now my thoughts are what if, God forbid, he has some sort of health issue and has to rely on that money. I'm just trying to think of all situations which would cause one or the other to leave, and what the other would do. I was thinking of forming a LLC, for liability reasons. Any input?

You need a lawyer to formulate a formal buy sell agreement that stipulates what happens if the partnership dissolves.. That is more important than the designation IMHO

[art2012]

Thanks, I'm aware I'll need a lawyer..I just wanted some advice on what I should lookout for. Anyone else out there who did something similar?

[nogods]

you gonna need three lawyers: one for you, one for your partner, and one for the partnership itself.

[joe d.]

Form an LLC first, as a partnership...use a lawyer who specilaizes in this type of law....then...he/she can explain all the requirements of each partner...and even put in a contract between the 2 partners of each partners' responsibilities/obligations.

[art2012]

Thanks Joe! So, we could utilize one lawyer to do all this? that sounds reasonable.

Have you ever formed an LLC partnership for a real estate project before? If you have any tips I sure would appreciate it.