From: bonomi@host122.r-bonomi.com (Robert Bonomi)
Newsgroups: misc.legal.moderated misc.invest.real-estate
Subject: Re: Two parties investing in multi-property, big question
Date: Mon, 23 May 2005 15:33:37 -0400

[ This is getting a bit far afield from 'law'. follow-ups trimmed -- to 
  "misc.invest.real-estate" only. ]

In article ,
nym9  wrote:
>
>Bubba wrote:
>>
>> A contract is the only way to handle this.  Hopefully your associate
>is not
>> a friend.  The odds are that if he is, this will be the end of the
>> friendship.
>
>What makes it unfair? Why is a contract necessary?
>
>All I am doing is giving up my share of the rental income until I
>decide to receive it again.
>

A contract is not necessary.

*UNTIL* there is a problem.  Be it a 'disagreement', a 'mis-understanding',
or an inability for one side to 'perform'.  Then there is the issue of 
'who meant what'.   Since there is no _record_, and the parties do not
agree on 'what was meant', the *only* way to resolve the matter is through
the courts.  Which is _very_ expensive, and leaves *no*one* satisfied.

Just a _few_ of the things your 'outline' fails to cover:
   1) what happens if it becomes necessary to sell the property *before*
      the mortgage is paid off -- how do you determine how much equity
      each owner has?  Don't think this is possible?  Look up the government's
      power of "eminent domain" -- you don't necessarily have any choice.
   2) What happens if one party *dies*?  The 'estate' has different priorities
      than the living person did.
   3) Who is responsible if expenses are higher than income?  Suppose tenants
      move out, and you can't replace them _immediately_.
   4) suppose there are _large_ unexpected expenses,  who pays?  A "normal
      wear-and-tear issue" that is not covered by insurance.  Like the furnace
      dies in the middle of the winter.  Or lead-based paint is discovered on
      the walls.  Or the electrical wiring is discovered to be 'deficient' to
      code requirements.  Or a termite infestation is discovered.  Or, or, or..

      What if a tornado, or similar 'natural disaster', renders the place
      'unlivable', until it is rebuilt.  Yes, you have "insurance" that 
      covers the cost of the re-building, but _what_about_ the expenses
      (like the mortgage) that are *still* running, even though there is 
      no income to pay them?

If you are entering into a "business venture" with someone, you need a 
*BUSINESS*ARRANGEMENT* with that person -- one that expressly spells out 
_all_ the contingency situations, and how they shall be handled.

What happens with the 'income' is the *smallest* part of the things that
have to be dealt with.