A Real Estate Limited Partnership or “RELP” is a legal entity that uses the appreciation of existing properties or undeveloped land to build new structures and generate income. There is a very high potential for growth, distribution of income and profits. The partnership requires that one partner be a general partner with unlimited liability, and that at least one other partner be a limited partner with liability to the extent of their investment. If you are involved in RELP it is highly suggested that you have an experienced real estate lawyer and accountant to advise you in your investments.
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Most investments into RELP’s are from “silent partners”; people that actually have no involvement in the management of the business.
A few of the benefits that they may receive in doing so are:
- No financial responsibility to the business
- Additional investment capitol sources
- Flexibility in the structure and management
- Simplicity in annual documentation requirements
There are some drawbacks to investing in a RELP. Limited Partnerships pass their losses on to their investors and cashing out on your investment may be very difficult. Many RELP’s contain agreements to a commitment for future investment contributions. It is very important to get a clear understanding of your tax responsibilities and your benefits before committing to the partnership. In order to be protected, the agreement should be looked over very carefully by a skilled real estate lawyer before you sign.
This type of investment is considered to be “long term” and not liquid which means that you will not be able to easily pull out. If you do decide to sell out, you would most likely take a significant loss and not get a fair price for it. There are arrangements that can be devised where as you may be able to produce a considerable profit. However, this requires careful research and planning.
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Do you need to have a real estate lawyer handle your part in a limited partnership?
Contact a real estate lawyer right now to deal with your complex real estate matters.
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