Buying my partner out

[ColinAustin]

hi members!

what do you think is fair when your partner wants you to buy them out? Obviously there are a lot of factors. But what advice would you have when looking to negotiate a fair price? Just the value of the home or do you pay them out everything they put into the home? I realize it`s a tough question. i guess i`m just looking for a starting point.

 

[Nir]

Question is too broad to give you a good specific answer? It depends on many factors not provided.
For example, how "unreasonable" it is to ask you to do so based on the contract?
Also, it depends on your and his financial situation. for example if he put 100k and you only have 10k now in the bank, then what do you expect us to say?
maybe share some numbers with us and both your roles with regards to the property operation..

 

[invst4profit]

Personally if my partner wanted out early there would have to be something in it for me. In other words my partner would have to expect a penalty for early withdrawal.
Financially if I was unable to buy them out at a discounted rate the partnership would have to continue.

 

[ColinAustin]

QUOTE (invst4profit @ Jul 7 2009, 06:24 AM) Personally if my partner wanted out early there would have to be something in it for me. In other words my partner would have to expect a penalty for early withdrawal.
Financially if I was unable to buy them out at a discounted rate the partnership would have to continue.

The problem is my partner wants to sell the properties and if we do, then we`ll suffer a big loss in this market. He doesnt care though. He`s not interested in real estate anymore. We had some bad luck with tenants and he just wants out. But I want to give it another go, learned from my errors and feel confident I can turn this around. So my only option is to refinance and buy him out. I agree though, if i`m taking on all the risk and then i feel he should have to pay a penalty to get out early (our exit strategy was to hold onto them another 2-3 yrs) and sell if the market appreciated enough.

Thanks for the advice!

 

[ChrisDavies]

QUOTE (ColinAustin @ Jul 7 2009, 04:37 PM) The problem is my partner wants to sell the properties and if we do, then we`ll suffer a big loss in this market. He doesnt care though. He`s not interested in real estate anymore. We had some bad luck with tenants and he just wants out. But I want to give it another go, learned from my errors and feel confident I can turn this around. So my only option is to refinance and buy him out. I agree though, if i`m taking on all the risk and then i feel he should have to pay a penalty to get out early (our exit strategy was to hold onto them another 2-3 yrs) and sell if the market appreciated enough.

Thanks for the advice!

I`m guessing that you don`t have a written agreement for your venture...but if a partner wants out you can buy him out at the present value (his loss) and I believe my agreement has a penalty. 20% of his share springs to mind.

 

[Thomas Beyer]

whatever you would take for your share .. pro-rated ..

it is like you and your brother splitting a piece of pie .. what is a fair share ? One brother cuts .. the other chooses .. then most likely you`ll end up with a 50/50 fair split !

In contract talk this is called a "shot-gun clause" .. he offers you X per share .. and if you don`t take it you have to buy him out for X / share ! .. Or the other way around: you demand Z per share .. and if he doesn`t like it you have to buy him out for Z / share !

 

[Nir]

Colin,

What was the ratio between the total annual rent and original purchase price: 8%? 12%?

Just curious to know if estimated CAP was low to start with or it was just bad luck(?)

Regards and Good Luck,
Neil