Becoming Partner in a Property

[svelte]

Hi There,

My son is considering becoming a partner in a property already owned by Partners A and B. Partner B wants out, and my son would bring cash to buy out Partner B.

Two questions:
– What forms would need to be filed to change the name on the title from Partner B to my son?
– What can be filed to protect the cash my son brings to the transaction? A lien against the property? In other words, he would like his cash in to be first thing to come out upon sale, and protect against the other partner putting additional loans against the property without his knowledge.

Thanks

[Anonymous]

You’re going to need a lawyer to write the deed, you may as well use the same lawyer to answer your questions.

[Hobie]

Hopefully that lawyer will recommend not doing a partnership deal at all. Partnerships are a problem.

Did son talk to exiting partner? Why getting out? Partner spouses can/will become a nightmare.

[EconProf]

Partnerships seldom work out. At the beginning, “newlywed” partners are inevitably optimistic about how things will go. As time goes by, their plans diverge, frictions arise, suspicions emerge. I have been in several partnerships and none have gone well, in contrast to investments where I have gone it alone.

[PCinSD]

Agreed, consult with a lawyer.

And, the existing Partnership Agreement may address most of your questions.

[FlyerInHi]

A residence to live in or commercial property as investment? It makes a big difference

[Anonymous]

[quote=EconProf]I have been in several partnerships and none have gone well […][/quote]

Well it is important to choose the right partner.

[gzz]

The other partners are not buying the guy out. They either lack the funds or are not willing to pay the price your son is. What does that tell you? Sounds like a potential disaster.

[gzz]

Once you are at the point of liens you’ve already lost.

[Coronita]

Svelte,

How sophisticated of an investor is your son? I ask because if this is the first time he’s trying to invest in a property, I don’t know I think perhaps he should try something more simple. Just my opinion.

[zk]

[quote=flu]Svelte,

How sophisticated of an investor is your son? I ask because if this is the first time he’s trying to invest in a property, I don’t know I think perhaps he should try something more simple. Just my opinion.[/quote]

+1

[ltsddd]

If things are that good, B wouldn’t be leaving. And if things are that good and B is leaving, A would want to take over the whole thing. In situations like these, I always presume that these people (A & B) are smarter and more knowledgeable than me. So, if they want to sell then it’s a good sign that I shouldn’t be buying.

[FlyerInHi]

[quote=ltsdd]If things are that good, B wouldn’t be leaving. And if things are that good and B is leaving, A would want to take over the whole thing. In situations like these, I always presume that these people (A & B) are smarter and more knowledgeable than me. So, if they want to sell then it’s a good sign that I shouldn’t be buying.[/quote]

Wouldn’t that apply to any sale? Not so simple. There are always sellers and buyers.

[La Jolla Renter]

IMO and experience, your son has a 80% chance of regretting a real estate partnership. That’s about my batting average of the dozen I have been in. But, the one home run I did hit was worth regretting the bottom 80%.

We need more detail on the deal.

What might make this a great deal. Not being on the mortgage. A great mortgage rate. Good cashflow. Well maintained property. Buying at a discount without real estate commissions and closing costs. Having the resources and liquidity to buy out partner A at anytime.

Partnerships can be a form of asset protection for bankruptcy and or divorce.

If the deal somehow requires getting on a mortgage then I say no deal.

[HLS]

Lawyers don’t write deeds.

Depending on current vesting, partner A may need to agree to partner B selling their interest. Will they ??

I have been involved with a few partners and all of them worked out well.
It is CRUCIAL that everyone involved understands vesting options and the consequences.
LINK:
http://www.firstam.com/assets/homebuilder/homebuyer/vesting-ways-to-take-title.pdf

**Based on your info, they would probably want TENANCY IN COMMON.
If partners are 50/50 there should be a clear understanding up front of how any disagreements will be settled;
otherwise the majority owner’s decisions are final.

There are possible consequences to any decisions & investments.
I know plenty of people who were so cautious and conservative throughout life and always focused on what could go wrong and never took any risks in life. Afraid of their own shadow.
Most of them have very little net worth today and their only income is around $1000 a month social ‘security’

[Author]

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