Please Help, real estate investing, two investors. (credit, cash, second mortgage)

[MovingtoLV]

I need help finding a contract or writing one up.

Short story:

My husband and I are investing in a property with a mutual friend. We both have rental properties of our own. Our friend has a home himself and we are currently living in an apartment.

We both contributed $15,000 for the down payment. My husband and I will be living in the house for a year or two, fixing it up to rent out.

My question is: How do we form a contract that protects both of us? This house is under is name and credit with the plan that the next one will be under our name and credit? Is there such a contract out there?

Thanks for any help and advice.

[pghquest]

If you are buying a property with a mutual friend, the only thing you need to do to enter into the agreement you stated is put all of your names on the deed.

That being said, it is smart to get a "partnership agreement" and clearly put down who will be responsible for what. These are readily available online.

[golfgal]

It might be worth the time and effort to set up a business entity of some sort if you plan on buying more than this house together. I would consult an attorney to draw up the proper paperwork and to help you figure out what type of company to set up.

[golfgod]

You have not even scratched the surface of the questions and problems. YOUR NAMES need to be on the deed to the house, not on an "agreement to do the next one in your names". You'll also need a written agreement, in advance regarding exactly which improvements are to be done, who is to do the work, your labor rate if it's you doing it.

Last (and I've left some stuff out) and not least you'll need a BUY/SELL agreement, or something similar regarding the disposition of THIS ASSET in the event of the death or disability of the other party. What if he dies? Do you want to be partners with his NOK? What if that person is an idiot and doesn't want to sell when you do? What if your partner doesn't want to sell when you do? What if the house suddenly needs $20,000 in repairs and you, or he can't come up with the money? Etc, etc, etc.

BTW, I've owned property with others, including friends, family and other experienced investors. Once into the deal I discovered some things about people that I didn't know before;

1. My brother and his wife were willing to jump on a plane and fly 2,000 miles to help me re-roof a house or three. Another "partner" was seldom willing to turn off an NFL game to help get a place ready.

2. One partner thought that it was OK to take his girl friend over to one of our houses for sex, a couple of times when it was occupied! No wonder it took him so long to paint!

3. One guy was so slow when working that we started in one corner of the living room painting in opposite directions. I had done the hallway, master bedroom and 1/2 of a second bedroom before he finished the living room.

4. One guy wanted to take out a second mortgage to cover a roof and kitchen (us doing the work so it was material only) even after he'd assured me going in that he had good cash reserves.

5. Same guy wanted to let a prospective tenant operate a day care center in a just remodeled house.

6. One guy, whose sole "skill" was painting (not very good either) and clean up, thought he should be reimbursed (if I wasn't there working equal hours) at the same rate I should be for roofing, ceramic tile, electrical, plumbing etc.

If you haven't figured by now, the best partner is no partner IMO.

golfgod