buying an apartment building with friends

[PanchoVilla]

I can second Spex's recommendation of Reed's books. I have about 5 or 6 of them. They are excellent IMHO. Although he is STRONGLY of the opinion that the only partner you should ever own RE with is your wife. I am not saying I wouldn't do it, but you really have to have a thick skin and be able to be objective about things rather than get emotional or worry about things. I recently got my first investment property 4-plex and I have already learned a good amount. It can mainly be summed up by stating that tenants will amaze you with how little they know about things like leases.

I also second the one person managing. And the agreement should spell out that they get paid for it too. Otherwise you will have problems with one person getting bitter about doing all the work. Figure out what a 3rd party manager would charge and base it off that. (probably discounted since the 3 of you live there) Setup tenant requirements and apply to anyone who lives there even if one of your co-owners moves out and wants to let his buddy have "his" apt.

Agree up front to exit strategies. What if partner 3 wants to sell to a person that partner 1 and 2 can't stand or feel is unethical? Spell out the exact distribution of all profits and expenses, sure it just you 3 now but what happens if one of the partners sells and the new person is not as agreeable about the profit allocations? There are lots of complications and you should definitely use some lawyerin now to avoid problems later.