What is Real Estate Limited Partnership

 

Real Estate Limited Partnership, also known as RELP, is when a gathering of two or more individuals joins to create an organization with a specific goal for monetary gains from a particular real estate property. This property can be utilized to acquire income on rent, construct a new building, or expand capital on empty land that is expected to increase in value. For it to be called a RELP, there must be no less than one common partner and a single limited partner, yet the quantity of the limited partner can change.

 

Things You Should Know About Real Estate Limited Partnership

 

When that group of people decides to form a Real Estate Limited Partnership, they will undergo a partnership agreement. The limited partners and the general partner should be specified in this partnership agreement. The ROI (Return of investment) is also acknowledged in the contract. Depending on the state where they have formed the partnership, a morality clause is sometimes included. The partner would not be released in the partnership without his approval unless they violated a clause stated on this partnership agreement.

 

The Responsibilities of the Limited Partner

 

When it comes to the Real estate limited partnership, the “limited” have constrained responsibility such as in the amount of debt by the investment. They can only manage the debt up to the amount of money they contributed to the partnership. This means that the “Limited” will never lose more money than the original amount they invested. They also do not have power over investments in real estate. Nonetheless, since there is only a minimum financial risk as opposed to doing it on your own, RELP is attracting individuals who want their investment to be returned without the customary hazard.

 

The Benefits of Being a Limited Partner

 

There are lots of benefits that you can gain from being a limited partner in a real estate limited partnership. Some advantages include minimum involvement in the work aspect, a high possibility that your investment will return, and tax shelters. However, by being a limited partner, you will not have any control over the investment and the work of the general partner. It means that you, as a limited partner, will have to put your entire trust in your general partner and hope that he will do his best to manage the monetary fund wisely.

 

When you consider entering into a partnership agreement through a real estate limited partnership, it will not hurt to consult an experienced lawyer first. This will help you enlighten yourself about the lawful responsibilities of every partner and the organization. They may also help you understand the clause on the agreement, or better yet, draft the partnership agreement that every partner will have to sign.