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Partnering in real estate is a risky venture

If you can’t afford an investment property on your own, you may want to consider a partner.

If you can’t afford an investment property on your own, you may want to consider a partner. However, those considering a partnership should appreciate such a venture involves more than a combination of funds and resources.

Partnerships always stem from good intentions and common goals. When business is good, it is easy to make decisions and progress. However, business can quickly grind to a halt when partners disagree.

Whenever people are buying an investment property together, we always recommend they enter into a partnership agreement. This contract addresses issues well beyond the distribution of profits and losses. It will dictate how the property will be managed on a day-to-day basis. From signing authority on checks to hiring policies, partnership agreements can cover every aspect of how the investment will be owned and managed.

Through a partnership agreement, investors can organize their business arrangements to suit their needs. An agreement should describe each partner’s contribution, whether cash, land, or services, their authority and decision-making powers, as well as their management duties.

More importantly, partnership agreements also provide a framework for dispute resolution. Whether it is the death of a partner or a bankruptcy, the agreement can predetermine how the breakdown of the partnership must be handled.

One of the most important elements is an equation to calculate the value of a partnership interest. Predetermining what someone's share is worth is extremely helpful upon the withdrawal of a partner or if the entire partnership is being dissolved.

Ultimately, each partner should receive independent legal advice to ensure their interests are properly addressed and protected by the partnership agreement.

– Elias Metlej is a real estate lawyer with the Halifax firm Blois Nickerson & Bryson. You can write to Elias at askelias@yahoo.com

 
 
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