Buying a property with my dad and one other partner. Hes terrible with money but not shady or anything like that. How can I protect myself? More info inside.
Not sure what info is pertinent but heres the long version.

My Dad and I work in commercial real estate. Hes a broker and I work as an agent under his license. 


I found a really good off market deal, negotiated an insane price and had the seller sign a contract. The "buyer" is one of our investors and as of now his name will be on the contract.  Basically we are using his money to buy the building, using our expertise and trades to fix it up, and flip it. We expect the gross proceeds to be about $500k split %50 to the investor, and 25%each to me and my Dad.


My Dad is notoriously bad with money and has zero savings. Hes also trying to amass cash so he can retire. We also want to make sure we are protected with the Buyer. What can I do to protect myself to make sure I get my share once the property sells?
[{"id": "ep6543n", "text": "Do you have a regular real estate attorney that you use? Did you already form an LLC for this purchase? Do you have a contract between all parties specifying ownership interest and exit strategy - with payouts?\n\n$500k is a chunk of change to me and I would not hesitate to pay an attorney $1000 to draw up the documents and make sure everyone gets exactly what is expected. What if one party wants out during the rehab? What if additional capital is required? What if the property is contaminated and unmarketable?\n\nMaybe I am too risk adverse? Haha. Good luck.\n\nEdit: Also, what are the investors expectations on return? Do they want $250K, or 50% of proceeds? My guess is $250k. What if that leaves  you and your father with $0 for your efforts? I am not trying to over complicate things, but this could go sideways pretty quick based on the short summary you provided.", "replies": [], "depth": 1}, {"id": "ep6ju5u", "text": "Based on the information provided, you have precisely zero protection. There are a couple different ways to deal with that and I'd be a little worried a career broker entered into this arrangement on a handshake with seemingly no understanding of a relatively common structure. This is usually step 1 of about 9 that end in you not getting paid. \n\n&amp;#x200B;\n\nTypically, the building should be assigned to and purchased by an entity (LLC, etc) in which you/your dad have an ownership stake and you need a operating/profit participation agreement drafted by a securities attorney to spell everything out. The latter is not a cheap endeavor. Your employment agreement with your dad as your qualifying broker should explicitly state how you get paid on deals. I would also recommend making yourself familiar with the tax implications of the above. \n\n&amp;#x200B;\n\nAlso, congrats on finding an investor that will assume all the risk without a pref and split profits 50/50. That should be a CCIM course lol", "replies": [{"id": "ep6ncxn", "text": "So. To be clear the contract has not been signed by the investor yet. We are assigning it to him this week. Seller is aware.\n\n\nWe will be signing docs and and making it clear what our position is in the deal and what we will be paid. \n\nMy main concern is how I make sure my broker(Dad)  pays me my 25% share. Our commission agreement does not cover selling buildings, only commissions. Can this be done with a notarized agreement or do we need to form an LLC?", "replies": [{"id": "ep6z796", "text": "Depends on the agreement(s) - is it 50/50 (then you get 25 of broker's 50) or 50/25/25? If 50/25/25, then needs to be dealt with on the buying entity side. If 50/50, then it's with your broker.", "replies": [{"id": "ep70qmg", "text": "Its 50/25/25. Since the contract is still in my name we will likely be forming an LP prior to assigning the contract to the investor.\n\nEdit. And yeah we did get lucky finding this guy.... however we are buying the property for only $20 psf. I'm closing on another down the street at $84 and another one almost identical is selling down the street for $65. He will be in a good position either way.", "replies": [{"id": "ep8gn77", "text": "We do not usually sign contracts but partnership agreements. I am guessing they are the same thing which basically spell out who makes the decisions and how the money gets split. Could the title company split the proceeds four ways on closing with your investor getting his initial investment back plus 50% of net and the same for you two, plus a small check to go into the partnership account to pay out any late invoices such as utility bills ect. The remainder would be small enough that even if it was mismanaged it wouldn\u2019t hurt financially, although it might confirm your worst fears.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ep6k9d1", "text": "Create an LLC and partnership agreement with yourself as sole managing partner. Other partners invest and get paid out per a defined schedule, but you control the deal, accounts and payouts", "replies": [{"id": "ep86mj2", "text": "Not to nit pick but LLCs have members not partners. Partnerships have partners. I doubt someone with 50% in the deal would allow someone with 25% to be the sole managing member.", "replies": [{"id": "ep8jea6", "text": "Correct. Operating agreement is what I believe they were thinking of. A partnership on a real estate transaction seems silly considering an LLC offers much better defined legal protections for the owners, and in an llc capital contributions don\u2019t dilute ownership.\n\nIANAL!!!!!", "replies": [], "depth": 3}], "depth": 2}, {"id": "epnaowv", "text": "This is the best strategy, except assign membership to it.  Purchase the property with the entity created, with you as the managing member.  Your investor can have 50% ownership, with 25% to you and 25% to your dad, but you should be the one signing the checks since you're doing all the work.  \n\n  \nIf i were the investor, I would want you and your dad to bake the commission of the property into the deal, so at least you have some skin in the game.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ep87d9a", "text": "You are right on the terminology. A 50% or more member not managing happens all the time though. You may have a doctor with a lot of money to invest, but no time or real estate expertise, for example.", "replies": [], "depth": 1}]