Partnership Dissolution Dilemma - Posted by Andy

Posted by Irwin on March 23, 1999 at 22:14:50:

You should try to fix the value of her equity now, to be paid for later. Plus, usually when a partner pulls out before the “end” of the project, they cannot expect to receive the full value of their partnership interest. In other words, you can’t just opt out at any time and force your partner to come up with the money to pay you off. On the other hand, you don’t want to share future appreciation with her, so you need a deed which terminates her interest. She’s entitled to a second trust deed for the amount she has coming, with nominal interest, payable upon re-financing or sale of the property. But, if she’s willing to take an unsecured note, then she’s being very fair to you. These are always difficult situations to resolve, but it sounds like maybe you don’t have a problem working with her.

Partnership Dissolution Dilemma - Posted by Andy

Posted by Andy on March 23, 1999 at 19:48:32:

I currently own a four-plex valued at $190,000 with a partner, our total debts against the property are $140,000, effectively giving us $50,000 in equity. My partner has told me she wants to pack in her life, move to Mexico and retire. She said if I cannot qualify to refinance the property and cash her out, I can either sell the property or she would carry a note for all of her share of the equity with reasonable payments to her so I can still have some monthly cash flow. She also said she doesn’t require securing a second trust deed for her equity and that she trusts me to pay her.

My question is, should I have her quitclaim the property over to me to secure my interest and ownership for future appreciation?

Should I give her a private unrecorded second trust deed for her interest, or should I record it?

I have also been thinking about converting these units into Townhouses and raising the rents, if I did that, the rents would almost triple and the equity would likely double.