Jim

The three LLCs were very different. Jim turned out to be seriously risk averse. And, he was only willing to purchase one home. This was naivety on our part. Given we had two partners who wanted multiple homes, we just assumed any new partners wanted multiple homes. At the time Jim approached us, we did not know he had no intentions of expanding past one property. And, in all fairness, he may not have known either.

One rental property does not work well. With several rentals, if one property needs a stove, or the tenant doesn't make a payment, the other properties can carry the load. Additionally, if one has a solitary rental property, and there is a mortgage on it, there won’t be much profit after a year. The property may turn a small profit and it provides a nice tax shelter, but generally one property isn’t a make or break investment vehicle. One property means waiting for the home to appreciate in value, selling it, taking the capital gains hit or converting it into a 1031 tax deferred exchange and doing it again.

Additionally, Jim was surprised when I started managing the partnership. This of course, was written into the contract from the beginning. And, he had no experience or time to do so anyway. I called the shots. I picked the bookkeeper (the same one managing my other LLCs), I picked the tenant. If something broke, I got it fixed and wrote the check on the LLCs behalf. Until this happened, Jim really didn't know this would bother him. In fact, I don't think Jim knew what to expect when we signed up to work together. But, for him this was too little control. In short, our goals and expectations were very different.

Mr. Partner bought out Jim’s interest a year later.

to be continued