Investing with partners in real estate can be tough. There are many things that need to be discussed in detail before heading into a partnership with anybody. These types of discussions will then translate into contracts on paper that will protect you from expensive accounting or legal fees down the road. If you are getting into a partnership with a family member, these things can also save a relationship!
Who is going to be responsible for the major decisions?
While there are going to be a lot of small decisions to make that could easily be handled by either partner, key decisions must be made at times and you'll need to have it worked out who gets to make them. It doesn't really matter whether one person is fully responsible for the big decisions or whether both need to be consulted - it just needs to be determined how the major decisions and the minor ones will be decided in the future.
Who is in charge of the finances?
A separate account will need to be put together so that personal accounts are not confused with the partnership one. Then, it will need to be decided who is responsible for signing checks. Signing authority needs to be allocated before the partnership is set in stone.
Whose name goes on the title?
It is always wise to have all partners named on the property title unless a corporation has first been formed. If this is your first investment partnership you may not want to jump into setting up a corporation until you are sure that this is going to be a long-term relationship with the partner involving many other future transactions.
What happens if a partner dies?
Although this isn't the most popular question to have to answer, it's a necessary one to ask. In most cases there is an agreement put into place where the surviving partner buys out the other deceased partner's property and pays a fair market value for it. This may also be the case if one partner decides to sell out and the other wants to remain.
On settling disputes
There should be some type of dispute resolution process worked out before joining a partnership with another. Lawyers demand a lot of money and court cases can last for a number of years. A good idea is to put the dispute into an arbitrator's hands where the decisions made are final and can no longer be debated. This is a great way to handle things so that regular business at hand can get going again.
You should always talk to a real estate lawyer here in Calgary before entering into any type of partnership on a property with another individual. This will ensure that everything is properly documented so that any questions or issues that may arise in the future can be dealt with swiftly with both parties being on the same page as to how they will be handled.