Profile picture for ctone19

Who pays what when investing in a condo with a partner and one partner lives there?

Who pays what what when investing in a house with a partner and one of the partners lives there until the condo is flipped?  The condo is $150,000 and has a $600 association.    We are putting down 20%, or 10% each.       
  • January 15 2012 - Edgewater
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Answers (9)

Before you invest in anything with 'partners' you should make rules and set procedures for such an event. This is a business transaction and everything should be spelled out in writing or inevitably 'issues' will arise.
If you cannot agree on simple things like this maybe you should not invest with partners. Are all the partners equal...all putinmg the same $$ down, all receiving the same % profit? If so them perhaps all utilities/taxes etc should be split equally. If not then perhaps base it on some other %.
  • January 15 2012
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Hi,
it is all negotiable between the partners and your agreement should be in writing...for example, if one partner is putting in more money the other can put in more labor...you can do it yourself or have a professional do it...
good luck
  • January 15 2012
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Profile picture for Matt Laricy
There is no set rule for how this is done. Before investing you should sit down with your partner and see how you would like it to be divided. You should then have an attorney draw up a legal agreement so there is no confusion later on.
  • January 15 2012
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I agree with Matt. It's basically whatever you'd like for it to be. Having all agreements in writing, drawn up by a lawyer is important. This includes, leases contracts, purchase contracts but it's a good idea to be clear on exit strategies for partners OUT of the connection.
Have a business plan, a business agreement.
  • January 15 2012
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Profile picture for Evelyn S. Fred
As Phillip poignantly stated this is a business transaction.  All business transactions should be in writing, clearly stating the "rules". 

Spell out who will pay the mortgage, timing, amount, who pays the assessments, timing, amount, if one is living there while the unit gets "flipped' then what do you each expect of the other, etc...  Be as concise as possible.

Rules are whatever you mutually agree to upfront.  Make sure your agreement is documented & given the "seal of approval" by an attorney.

Good luck!
  • January 15 2012
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Profile picture for sunnyview
You need everything in writing including a time table for the flip. If the occupant partner is in residence and you are not, they have no reason to sell and move. If the partnership is 50/50 you may find your money tied up for longer than you anticipated, may find the partner unwilling to move and may find it virtually impossible to evict them and sell.

Get a good attorney to spell out EVERYTHING or you are walking into trouble. Remember, if you bought and rented out this property you would have income coming in so the occupying partner should be compensating you for the 50% lost rent while they live there. Expenses and profits shold be split 50/50 with an agreement included on how to terminate the agreement and value the property upon the dissolution of the partnership. Spell it out now.
  • January 15 2012
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Profile picture for Ofe Polack
Partnerships are very tricky.  Get everything down in writing.  It may help to have a real estate attorney draft a document for you.  That way you agree to every possible eventuality beforehand.  Good luck!
  • January 15 2012
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All the details of the partnership should be layiut on abinding legal agreement. Each party should have their own lawyer review the contract. You will be better served with more details rather than not enough. Make sure all situation and items are addressed individually. Best of luck
  • January 15 2012
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With your question it seems like there have been many responses for "get legal advice" and "put it in writing." Let's assume that you're intellegent enough to do things the right way in that arena.

For example, I trust my brother completely. If I were to be in a situation were we both placed 15k down and he lived in the condo for a few months there would be a 2 things might suggest when structuring the flip. 

Split the cost of everything and the profit at a pre-determined ratio. 50/50, 60/40, 72/28, whatever we choose.

1)If the condo fee includes great amenities that he is using instead of paying out of pocket (gym, pool, internet, clubhouse living room), I would ask that he cover slightly more of the condo fee or buy me lunch more frequently, but I wouldn't expect him to pay for the whole amount.

2) Pre-determine what the rent would be for the unit before remodel. Monthly collect the rent and place it in an escow account. Upon sale treat that rent collected as profit.  

Also, evaluate the business and personal relationship you have with your partner. What is the potential that they will do more business with you in the future? Regardless of what you decide just remember that it's important for you and your partner to feel like you are both benefiting from the arrangement and doing the right thing. The stress of a broken relationship wth someone important is usually more long lasting and stressful than a bad investment.

  • January 16 2012
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