Investment Property Partnership

In a recent post I suggested a few ways to soften the jitters of owning that first investment property. One suggestion is to purchase and manage the investment with a trusted partner. When properly executed a partnership can provide much needed financial and hands on benefits to owning a rental property. The key is to choose the right partner and document the terms of the partnership in a very specific contract. Doing so will help deflect any ambiguity or arguments during the partnership.

Advice from an attorney should be your first step in forming any partnership and working closely with them to draft the legal partnership contract is a must. There will certainly be more up front work needed in purchasing investment property in a partnership, but the upside is that you will have a very clear understanding of most of the factors that go into owning and managing the property. There are many positives to a partnership approach, here are a few:

  • Decisions will be well thought out before acting on them.
  • Tracking profits and expenses will be heightened compared to a self managed approach.
  • Expenses will be shared and less of a burden than with a self managed property.
  • The overall tasks involved with managing investment property will be cut in half.
  • There will be a trusted backup for those vacations and last minute travel needs.

These are but a few examples of what a partnership has to offer. The key to the partnerships success will be sticking to the letter of the partnerships contract.

The down side to a partnership arrangement is that you are giving up complete ownership of the Investment. The effects of this will include:

  • Having to justify most of the actions you take on behalf of managing the property.
  • More paperwork and documentation then would occur in single ownership.
  • Less profit overall.
  • Less control over the management style of the investment property.
  • The danger of a partner bailing out on the agreement or in some way defrauding the partnership.

These are not small matters and probably why I have never entered into a partnership contract for an investment property. I trust my own instincts and capabilities enough to go it alone when investing and to be honest, I don’t want these down side aspects to interfere with my management style. With that said I do acknowledge that I might learn a thing or two by taking on a trusted partner and be able to fish in a bigger pond, (invest in a higher bracket of property). For those on the fence or a bit unsure of going it alone in investing in rental property, a partnership might be the ideal situation on the path to property investment.

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