13 min
Pitfalls Of Real Estate Partnerships V12 Bat
-
- Business
What are some of the major points to pay attention to when forming a partnership?
First make sure you have a legal entity in form of an LLC for example. This is vital to make sure if someone is coming after you they cannot take your personal assets.
The next big thing is to make sure in case of a stalemate one person has the ultimate decision making power. This is a bit abstract but the point is you never want to get into a situation where there is a stalemate, often times that is not good for either party involved.
Doing a 40/60 split could also work but that makes the intangible things harder to make fair. What I mean by that is if you're splitting the cost of maintenance or taxes based on a 40/60 ratio that is no problem there but what happens when you need to do due diligence on a property or you need to think about it rationally and see if it's a good investment? Well those are the things that are just as important as paying your taxes for example but they are intangible things that cannot be split 40/60 or any other way. That is why if you do 49/51 split that is basically the same as a 50/50 split so no one has less incentive in any area of the deal and everyone treats every deal they are involved in equally both on paper and in their head.
What are some of the major points to pay attention to when forming a partnership?
First make sure you have a legal entity in form of an LLC for example. This is vital to make sure if someone is coming after you they cannot take your personal assets.
The next big thing is to make sure in case of a stalemate one person has the ultimate decision making power. This is a bit abstract but the point is you never want to get into a situation where there is a stalemate, often times that is not good for either party involved.
Doing a 40/60 split could also work but that makes the intangible things harder to make fair. What I mean by that is if you're splitting the cost of maintenance or taxes based on a 40/60 ratio that is no problem there but what happens when you need to do due diligence on a property or you need to think about it rationally and see if it's a good investment? Well those are the things that are just as important as paying your taxes for example but they are intangible things that cannot be split 40/60 or any other way. That is why if you do 49/51 split that is basically the same as a 50/50 split so no one has less incentive in any area of the deal and everyone treats every deal they are involved in equally both on paper and in their head.
13 min