Real Estate Investment Partnerships Wayzata MN

Successful real estate investments require two basic ingredients: capital, and the skills and knowledge to put that capital to good use. While a handful of individual investors might have both the financial wherewithal and the knowhow to venture out on their own, the vast majority probably have only one of those basic ingredients to work with. Thankfully, real estate investment partnerships offer the opportunity for investors to “offset [their] area of lack,” Mike Mortimer, CEO of the real estate firm Abner Group, which is experienced in such partnerships, said.

Real estate investment partnerships or joint ventures normally involve a single real estate asset and usually consist of “passive” owners, who generally provide the funds for the investment operation, and “active” owners, such as construction companies or land developers, who execute the business.

Found a partner? Find a lawyer

Although the concept of forming an investment partnership is simple, outlining specific terms in structuring a partnership is not a do-it-yourself process. Hiring a legal professional who specializes in real estate law is a critical first step.

Legal assistance is crucial when establishing a partnership, such as an LLC “You really need to be able to...pay an attorney to help you through the process or else there’s going to be holes in your documentation and your structure,” Mortimer said. “If you can’t afford an attorney, then you can’t afford to be in a partnership.”

Real estate investment partnership structures vary widely, but the most common structure is a limited liability company  (LLC).  Similar to a corporation, LLCs provide liability protection for the “members,” or owners, of the company; however, other features of LLCs provide management flexibility and the benefit of pass-through taxation, according to the Internal Revenue Service website.

In many states, members can create an LLC online for a nominal fee but enlisting the help of an attorney in putting together a detailed operating agreement is a must. Although investors may be reluctant to foot the bill for an attorney’s services, upfront legal fees are a small price to pay for the proper protection of each member’s interest.

“A lot of investors are very conscious about funds and don’t want to spend any money over and above putting it into the investment property,” Traci Ellis, president and principal attorney at Traci D. Ellis, Esq. LLC, said. “But things can go so sideways without [an] operating agreement [that is] drafted in such a way that protects each person’s interest. It’s money well-spent, because it definitely costs more to clean up the mess afterwards.”

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