If you’re going in on a real estate investment with a partner, make sure your LLC operating agreement covers these five things.
Disclaimer: this is just my thought process based on what I’ve learned. I’m not a lawyer, I can’t give legal or financial advice, so treat this as a starting point for your own research and talk to an actual expert about your situation.
5 Things Your Operating Agreement Needs to Cover
- Capital contributions: who’s putting in what initially? Cash, property, something else? Be specific.
- Profit and loss distribution: doesn’t have to be split evenly, but it should reflect the actual amount of money, risk, and work each person is putting in.
- Roles and responsibilities: who’s managing the tenants, dealing with contractors, handling the day-to-day? If you don’t define this upfront, you end up with resentment or chaos. Probably both.
- Exit provisions: this one’s huge. What happens if one partner wants out? A buy-sell clause gives you a clean mechanism so no one’s stuck in a partnership they can’t leave.
- Dispute resolution: disagreements happen, deadlocks happen. Mediation, arbitration, some kind of tiebreaker process… something needs to be in there before you actually need it.
Not a comprehensive list, and not legal advice. But if you’re looking to set up a partnership, here’s the template I used, free to grab and a good walkthrough of everything above.
