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.
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