How to Structure Real Estate Partnerships

Real estate partnerships can be a powerful way to scale your investment portfolio, share risk, and combine complementary skills and resources. Whether you're teaming up with a friend, family member, or professional investor, the structure of your partnership can make or break your success. Clear agreements, well-defined roles, and legal protections are essential. Here's a practical guide on how to structure real estate partnerships the right way.

1. Choose the Right Partnership Type

Before anything else, you need to decide what type of partnership works best for your goals. The most common structures include:

• General Partnership (GP): All partners share equal responsibility and liability. This is the simplest form, but it also carries the most personal risk.
• Limited Partnership (LP): One or more general partners manage the operations and bear full liability, while limited partners contribute capital and have limited liability.
• Limited Liability Company (LLC): Often the preferred structure for real estate partnerships, LLCs offer liability protection to all members and flexibility in management and taxation.

Choosing the right structure depends on the roles of each partner, risk tolerance, and how profits will be shared.

2. Define Roles and Responsibilities

A successful real estate partnership depends on clarity. One partner might bring capital, while another contributes time and expertise. For example:

• One partner finds and manages properties (active partner)
• Another finances the deal (passive partner)

Clearly defining who does what prevents confusion and conflict later. Document these roles in your operating or partnership agreement.

3. Agree on Profit and Loss Distribution

How will you split profits? Will it be a 50/50 split, or will one partner get a higher return for putting in more money or taking on more risk?

Some common profit structures include:

• Equal splits
• Preferred returns (e.g., one partner receives a set return before profits are split)
• Equity-based returns based on investment percentage

Spell this out in writing before any money changes hands.

4. Create a Solid Partnership Agreement

The partnership agreement is your legal foundation. It should cover:

• Ownership percentages
• Capital contributions
• Decision-making authority
• Dispute resolution processes
• Exit strategies (how to handle a partner who wants out)
• Buyout options
• Profit distribution schedules

Hiring a real estate attorney to draft or review the agreement is highly recommended. This document protects everyone involved.

Read more: How to Create an Ironclad Partnership Agreement

5. Plan for the Unexpected

Life happens—people move, priorities change, or financial issues arise. Your partnership structure should account for:

• What happens if a partner defaults or dies?
• Can a partner sell their share?
• What if the property underperforms?

Having contingency plans in place shows professionalism and prevents future problems.

Final Thoughts

Real estate partnerships can unlock opportunities you couldn't achieve alone—but only if they're structured properly. Take the time to choose the right legal entity, define roles clearly, agree on financial terms, and protect your interests with a well-drafted agreement. A strong foundation will help your partnership thrive and your investments grow—safely and profitably.

For legal help in California and your other needs, contact BERYS LAW on this page. We also offer courses on real estate investing, landlording, and templates right here!