I was talking to some friends who were looking at purchasing a condo together. They wanted to know what I thought about the premise of them owning a rental property as partners.
Should friends or family purchase rental property together?
I try to advise people to stay away from partnering with friends or family, because more times then not, the relationship changes and not in a good way. With that in mind, if you are planning on a partnership, there are a few things I’d recommend you do.
Questions to Discuss:
How you’ll purchase the property
Who will make payments on the mortgage? Utilities?
How will you split up any monthly profits?
Who will manage the books?
Will you manage the property or will you hire a management company?
If there is NO management company
Who will be the point person for contact with the tenants?
Who will handle repairs or maintenance issues?
If there IS a management company
Who will be the point person with the manager?
How much can one person authorize or spend without the other partner’s consent?
What happens if one partner dies? Is incapacitated?
If the property is sold, how will the profits (if any) be split?
Once you’ve talked about these questions and have agreed upon the answers, you need to have a sit down with a real estate lawyer. Draft up a partnership agreement and be sure you are both comfortable with EVERYTHING in it.
If you’ve got additional questions to add to the list, please let me know.