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How to protect your interests in a real estate partnership

On Behalf of | Feb 20, 2021 | Firm News

When you enter into a New Jersey real estate partnership, you may do so with the belief that you have more power and money-making potential when you work together. You may look to your partner or partners to expand your access to capital, resources or connections, among other reasons. However, you would be wise to make efforts to protect your own interests before making things official. 

Per Medium, it is always smart to protect yourself in the legal sense when entering into a real estate partnership. This holds true even if your partners are family members or long-time friends. To do so, consider taking the following steps. 

Be crystal clear about roles

Be sure to create an operating agreement before entering into a real estate partnership. In that agreement, outline precisely what role each partner has in the partnership. Are some partners active and others silent? What stake does each partner have in the investment? The more specifics you include in the operating agreement, the lower the chances of partnership disputes arising down the line. 

Establish a limited liability company

When you have equity in an investment property, you may want to think about creating a limited liability company and transferring the title to the property to the LLC. Why? This helps protect your personal assets if anything goes wrong with the property in question and someone tries to hold you accountable for it. 

If you have equity in multiple investment properties, avoid placing them all under the same LLC. Doing so may defeat the purpose by lessening the protections this type of business structure allows.