How to Buy and Rent Investment Property With a Business Partner

There are a host of benefits to working within a real estate partnership. When you work with a business partner, you split all the expenses for your investment (like property taxes and repairs) right down the middle. When you work with a business partner, typically there are different things you both bring to the table; if one of you has the funds and the other has the experience, by working together you can go after bigger deals and move on them faster, since you’re not trying to compensate for what you don’t have (experience or cash).

But real estate partnerships have a tendency to get... tricky. It can be hard to get both partners on the same page when it comes to making joint decisions in a reasonable time frame (the old “too many cooks in the kitchen” concept). You might have completely different ideas on things like budget, renovations, and design — and those different ideas can make it hard to come to an agreement that works for both of you. You can bump heads on how you spend your time, how you manage your property, how much to pay for repairs, or how you want to move forward with your investment — and that can definitely complicate things.

But it doesn’t have to be that way! If you do your due diligence and approach a partnership with eyes wide open, it can work out for everyone involved.

Let’s take a look at how to buy and rent investment property with a business partner:

Talk About Your Long-Term Goals

The first thing you’ll want to do when buying and renting investment property with a business partner is get crystal clear on your long-term goals — because if your long-term goals don’t align with your partner’s, there’s trouble ahead.

Before you enter a real estate partnership, sit down with your partner and talk about what you envision for your investments. Do you want to rent the property or flip it for a profit? If you want to rent, for how long? How much profit are you hoping to make off the rental property? At what point do you want to make renovations to improve the property and increase the value? At what point do you want to sell?

Having a conversation about your long-term goals before you buy or rent investment property will ensure you and your business partner are on the same page — and, if you’re not, will save you from entering a partnership that ultimately won’t work out in the end.

Assign Responsibilities From the Start

Once you’re sure you’re on the same page with your potential business partner, it’s time to decide who is responsible for what. Dividing up the responsibilities from the start will not only mean everything gets done, but it also creates a sense of accountability in the partnership.

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Decide who is going to be the main point of contact for every part of managing your investment property, from negotiations to repairs to tenant issues to property management to legal matters. When you agree on who’s responsible for what from the start, it builds a level of accountability in your relationship — and that accountability can help keep the partnership on track.

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Get Everything in Writing

It doesn’t matter if you’re buying and renting investment property with your parent, your partner, your sibling, or your best friend in the world — before you even think about moving forward with your partnership, you need to get everything in writing.

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It’s easy to enter a partnership — but navigating a partnership or, worst-case scenario, ending a partnership is a lot trickier. No matter how much you trust your business partner, it’s important to get everything in writing in the form of a contract. When everything’s on paper from the start, it makes everything much easier down the road.

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Set Up a Legal Partnership

Once you have your contract and you’ve decided to move forward with your business partner, it’s time to make it legitimate by creating a partnership in the eyes of the law. You’ll want to create an entity to purchase the property under both your names (like an LLC) so you’re both equally liable for the investment. If the property is only in one partner’s name, the other partner won’t have any skin in the game — and might try to bail if the investment goes south.

Successfully navigating a real estate partnership can be tricky — but it’s certainly not impossible! And now that you know how to buy and rent investment property with a business partner, you can enter your partnership knowing what to expect — and how to set yourself (and your partner) up for long-term success.