How should you divide commercial real estate with your partners?
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How should you divide commercial real estate with your partners?

On Behalf of | Aug 10, 2021 | Real Estate |

If you have real estate holdings and have a partnership with others, you may be unsure of how you should divide those holdings. There are a few ways that you can do so.

To decide how to divide your commercial real estate holdings, you first have to know the value of those properties. Getting current appraisals is important if you intend to sell the property and split the profits from the sale. If you don’t intend to sell, then you can wait on the appraisal and instead determine a percentage of the property’s value that you and your partners will own independently.

How can you divide commercial property with your partners?

One of the ways to divide the commercial property is with an even split. If you have one partner, then you can have 50% ownership of the commercial property. If you have three other partners, you might split the property into 25% interests.

This isn’t going to be the right method for everyone, though, depending on how much each partner has invested into the company.

Your initial investment could determine ownership

Here’s an example. If you have two partners, you might have each invested 25%, 25% and 50%. The person who invested 50% into the real estate should maintain a 50% share and receive 50% of the value of that property upon its sale. If you invested differently, such as at rates of 40%, 10% and 50%, the value could be split based on your initial investment.

It’s important for you and your partners to decide on how you want to split property that you purchase early in your partnership. Then, if you have any questions about it later on, the details should be listed in your partnership agreement.

Make your decision early to prevent conflict later

Knowing how much each partner is entitled to is beneficial if you want to buy out a partner’s share or rent a property for a share of rental income. You and your partners being in agreement on the split of that asset, and including those details in your contracts, will also help you minimize conflicts or arguments about money and investments.