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Merging Multiple Properties and Owners into a Partnership

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rated:
Hi There,

I am looking at merging some of my properties as well as others with different owners into a partnership among the owners. What is not clear to me is how to value this transaction and split the partnership. It is easy enough to determine the value equity and debt among the properties and calculate a ownership percentage. The question is how to value the differences in interest rates and differing locations on the amortization on the loans when calculating partner ships %.

Thoughts?

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rated:
Potentially really messy. Why do you want to do it?

rated:
AbbaZabba said:   Potentially really messy. Why do you want to do it?
  for fun and profit! Spread risk out....

rated:
In terms of legal liability, the whole partnership, including all of the properties are sued. Does this sound wise? Each property should be in it's own LLC for obvious reasons. You can then have the LLC owned by the partnership by breaking up the membership percentage.

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Greatness said:   In terms of legal liability, the whole partnership, including all of the properties are sued. Does this sound wise? Each property should be in it's own LLC for obvious reasons. You can then have the LLC owned by the partnership by breaking up the membership percentage.
  Yes. Not actually structured as a business partnership.

rated:
It might not fly with if you have bank holding note. They may not be willing. Also, you are tying up properties together and selling any property from package will be nightmare in terms of tax, liability and mortgages. As suggested by someone, it is wise to hold each property in its own LLC.

rated:
OP, I agree with the others. Lots and lots of downsides*. IMHO you haven't explained the pros you see in doing this, enough pros to outweigh the cons.

*I'll add some more:
You might be giving away your financial freedom, which you probably worked hard for. You will be married financially to these other owners. How strong are they? If stronger than you you might find yourself a minority owner with limited say over how things are done, or when you get your share of profits. If you are stronger than them, they'll plead poverty if a property needs a capital call, and you'll be holding the bag since you've got the most at stake.

Here's even more:
What if an owner files for BK? In a lot of loan docs, one owner filing BK is treated as if the whole ownership did. Could mean the loan's rate gets bumped to the "default rate," the loan gets accelerated, or you lose non-recourse protection.

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