Business Management

How to Use Partnerships to Move Your Real Estate Business Ahead Faster & Further

Expertise: Personal Development, Real Estate Wholesaling, Real Estate Investing Basics
87 Articles Written
partnership-tips

In wholesaling, there are many components and moving parts, such as marketing, acquisitions, dispositions, transaction coordinating, networking, property inspections, and more. Handling all of these jobs is difficult for any one person. This is where strategic partnerships come into play.

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This was difficult for me because growing up, I had to know a little about everything in order to be successful. Growing up on a farm, we didn’t hire out — we figured it out. This philosophy was challenging to me, and later in life, I realized the many flaws with this concept. I’ve learned the importance of focusing my attention on my areas of strength, just as we all should. This is not to say we must ignore our weaknesses, but if we can find someone who can do the job better, then we should give that person the latitude to excel in that area. Trust me, it will benefit you both.

A Partnership Can Move Your Business Faster & Further

Effectively using the power of a partnership will push you along your journey a lot faster, and you can go a lot further.

This may be difficult in the beginning because of your limited knowledge of wholesaling, but you have to use everything to your advantage. You have to use what you do know, along with what you don’t know. If you ask any professional, they will stress to you the importance of partnerships and mentorships.

One of the most powerful tools to help you along your journey to becoming a successful wholesaler is self awareness. By conducting a self assessment, you will gain a clear picture of what you have and what is needed. Once this is completed, you can use your findings to attract that person who has the knowledge base you seek. I am a firm believer that everything you need is locked in someone else, and you have to ask the right questions to get what you need. If your counterpart is wise, they will seek the same from you. Don’t get me wrong — it is not easy finding this person, but it is not impossible. The laws of attraction will become evident once you know what you need — then you can attract it to you.

Related: 4 Key Traits That Define a Good Employee or Business Partner

Being Tenacious in Getting What You Need

Again, evaluate what you’re good at: If you’re good at talking with sellers, continue to develop that skill and enhance your public speaking and negotiating. If you’re great at marketing, work on this area and let someone else speak with sellers. Or you are very analytical, then you can do all the data mining to provide information for the marketer. It will all come together, but you need to know what parts are needed to make things happen.

I still work to focus on my strengths and outsource my weaknesses. I utilize the skills of virtual assistants to help me develop areas I have limited knowledge in. If you know the areas you are limited in, you can then hire VAs who are willing to do what what you’re not good at or things you just don’t like to do. For me, I am not particularly fond of working with a lot of data, so I recently hired a VA to do all the skip tracing for me, a job that if I needed to do, I could have done, but I know my time is best utilized elsewhere.

Strategic partnerships are win/wins for all parties if set up correctly. When acquiring a true partner, a written agreement should be in place. This could be in the form of a partnership LLC or some memorandum of agreement. Without this, your success could quickly become a huge failure. There is an old saying that you never need an written agreement until you need a written agreement. Please don’t find yourself like Prince’s heirs — without a written agreement (for those who don’t know, apparently Prince died intestate, but that may be hearsay).

If you would like to know more about the power of strong partnerships, I’d recommend the book Power of 2 by Rodd Wagner and Gale Muller. They expose some profound points about partnerships.

Don’t Let What You Don’t Have Stop You

I was inspired to write this article because the fear of the unknown limits many newbies from jumping into the world of wholesaling. I know this because I was a subject matter expert on letting the fear of the unknown slow me down. Once I shed the fear of embarrassment, there was nothing I was afraid to ask and no one I was afraid to be foolish in front of. I had to acknowledge this, and by doing a self assessment, I knew what I needed — and fear could not stop me from going to get what I needed.

Related: 3 Ways to Partner With an Experienced Investor For Your First Multifamily Deal

It is very important to focus on your needs — what is needed for you to get your first deal, what is needed for you to get started marketing, what is needed for you to feel comfortable talking with sellers. Evaluate your needs one at a time, and you will be able to source those needs and become successful.

Are you aware of what you need but don’t know how to ask or where to find it? Well, Bigger Pockets is a great resource — ask questions in the Forums or leave a comment below, and maybe I can steer you in the right direction.

What do YOU need in order for your business to thrive and grow?

Let me know with a comment!

Marcus Maloney is a value investor and portfolio holder of residential and commercial units. He has completed over $3.3 million in wholesale transactions. Currently, Marcus is a licensed agent who wholesales virtually in multiple states while building his investment portfolio. He has also converted some of his deals into cash-flowing rentals. Marcus holds seven rentals, two of which are commercial units. He’s even purchased a school, which was converted into a daycare center. His overall goal is to turn what is a marginal profit into a significant equity position. He leverages the equity by using the BRRRR (buy, rehab, rent, refinance, repeat) strategy to increase his portfolio without any money out-of-pocket. Marcus has been featured in numerous podcast such as the Louisville Gal Podcast, The Best Deal Ever Podcast, The Flipping Junkie, and many others. He contributes content regularly to his YouTube channel and blog.

    John Thedford
    Replied about 6 years ago
    Thanks for a great article.
    Mark Ferguson
    Replied about 6 years ago
    Thanks for the comment John! I appreciate it.
    Mark Ferguson
    Replied about 6 years ago
    Thanks for the comment John! I appreciate it. Reply Report comment
    Tom Phelan
    Replied about 6 years ago
    I once entertained buying a property that had a 4% return, a trailer park where the police were frequent visitors to settle domestic disputes, and you had to collect the rent with a baseball bat. Although the Cash On Cash was mouth watering, I passed
    Dennis
    Replied about 6 years ago
    I have always entertained the idea of buying such a property installing cameras and cashing in on the reality television craze. The show would be a combination of COPS, World’s Worst Tenants, and MTV’s real world.
    Mark Ferguson
    Replied about 6 years ago
    Haha, now that is a good idea.
    Dennis
    Replied about 6 years ago
    I have always entertained the idea of buying such a property installing cameras and cashing in on the reality television craze. The show would be a combination of COPS, World’s Worst Tenants, and MTV’s real world. Reply Report comment
    Horizon
    Replied about 6 years ago
    Great article Mark!!
    Mark Ferguson
    Replied about 6 years ago
    Thank you, I’m glad you enjoyed it!
    Jan Whitney
    Replied about 6 years ago
    I like this perspective and explanation. The 2% rule is good as a very general guideline but there is a lot more that needs to be taken into consideration when evaluating a property. Thanks Mark.
    Katelynn
    Replied about 2 years ago
    LOL sounds great.
    Mark Ferguson
    Replied about 6 years ago
    Jan, thank you for the comment. I think the 2%, or any % rule is best used by seasoned investors who know their, market, costs and other factors already.
    Jason
    Replied about 6 years ago
    I tend to cringe when I hear rules of thumb. They leave a lot to be desired. I use my past trends to help determine my future costs. My maintenance runs at 12%, property management with lease up fees and maintenance costs is 12%. The only fudge factor I throw in is 8% in vacancy assuming the unit will be vacant 1 month per year. To be honest I need to adjust that number as well. The problem with even those numbers is it doesn’t hold the same for all the situations you described above. Using ROI can be very helpful. Mike Zuber had a great spreadsheet he uses. Its in the BP archives under last years BP event. Jason
    Mark Ferguson
    Replied about 6 years ago
    Thank you Jason, I’m going to look for that spreadsheet.
    Randy Smith
    Replied about 6 years ago
    For what it is worth, I have used a 1% rule, I’m that the home should rent for approximately 1% of the cost of the home our the appraised value, whichever is higher. I have found this to be in the “real” ball park. Then, I was $50.00 increments to either increase or decrease the monthly rent. Say a home is a well desired location, add 50, or not a great location deduct $50.00. Even this may not be the best method, but it had worked for me. The 2% rule is way off what a home will actually rent for in my area. Maybe the 1% rule will work for you, with minor adjustments based based on small plus or minus
    Mark Ferguson
    Replied about 6 years ago
    Thank you for the comment Randy, All my rentals are above 1%, right around 1.2%. There are so many factors to consider, it is hard for me to base a purchase on rent/value. I especially want to know what my cash on cash return is.
    Steve Johnson
    Replied about 6 years ago
    This is a very helpful article for us newer investors. I’ve read up enough now to have finally caught on to why rules of thumb aren’t the most precious thing out there. I was really stuck on Cap rate for awhile and the best way I’ve had it described was to use the rules as a quick snapshot of how the property may perform. Its not the most accurate thing so don’t rely on it only, but instead do a quick analysis with such a formula and if it looks good run your real numbers. And Jason, where can I find exactly that ROI spreasheet you mention Mike Zuber has?
    Mark Ferguson
    Replied about 6 years ago
    Steve, that sounds like a great strategy.
    stuart Stevens
    Replied about 6 years ago
    I think that when you use the 2% rule that the estimated initial repair cost is added to the purchase cost.
    Mark Ferguson
    Replied about 6 years ago
    I have heard this a couple times in the comments and I am probably mistaken on that part of the rule. It does make more sense that the repairs are added onto the purchase price. However, the rule still would not account for how much cash, some one would have into the home. My cash on cash return is very important to me. Not only does cash on cash return go down, the more money you put in for repairs, but it decreases your ability to buy more properties, because you use dup all your cash.
    john milliken
    Replied about 6 years ago
    the 2% rule is the lamest of all the “rules” floating around. the break down you just did mark is a perfect example of why this “rule” is far from being a standard determining rent. your 2 for 2 on articles Mark.thanks for a another great read, and can’t wait for the next article.
    Mark Ferguson
    Replied about 6 years ago
    Thank you John!
    Dawn A.
    Replied about 6 years ago
    “The 2% rule does not consider any initial repairs into the equation” I’ve always assumed that the 2% rule meant the monthly rent is 2% or more of the purchase+rehab (to get “rent ready”) cost. That’s what I’ve been achieving (sometimes over 3%). But I completely agree that this varies per market and not everyone can achieve this. It also helps to buy properties under $50,000 (and as cheap as possible).
    Mark Ferguson
    Replied about 6 years ago
    Hi Dawn, I think you are right. The only place I see the rule coming close in my market is in the lower end, but if I were to add repairs into the equation, those no longer meet the guidelines either.
    Pete Snow
    Replied about 6 years ago
    The 2% rule works as long as you include all your cost to purchase the house. In Deal 2 the rent would need to be 2% of $90,000.00 or $1,800.00 per month. If $1,200.00 is amount of rent you can collect I would not buy the property.
    Mark Ferguson
    Replied about 6 years ago
    Thanks Pete, Are you seeing deals that meet the 2% rule in your area? And if so, what price range are they in?
    Joe Locklear
    Replied about 6 years ago
    I agree with the author Mark. Any valuation formula that is based on only one variable is fatally flawed. Value is almost always subject to the needs of the prospective purchaser. I recently purchased a property in a “borderline” neighborhood for 22K that rents for 725 monthly. I also purchased 6.5 marsh front, high and dry acres overlooking a cove for 38K. There is no income on the acreage, but I would not trade it for 5 of the 22K/725mo houses. Why? Because of my situation and because the marsh front property is on the property tax roll at 215K. The rental property is assessed for around 30K. Value is always subjective. Forget quick formulas, thay are false crutches that prevent you from learning to truly analyze every opportunuity. If you are evaluating rental property, combine ALL variables to result in a spendable net annual income. Divided that by the cash investment and you will get a net return %. Even with the return rate, you need to consider the actual cash flow in monthly dollars, location of the property, developmment trends in the area, how you will ultimately dispose of the property (I.e 2 bedrooms may cash flow well, but will be more difficult to sell later). The are MANY variables, the most important being your goals. You need to establish a business plan then learn to determine if a prospective purchase fits within YOUR plan. If it does, buy it. If it does not, pass. There is no formula to do this for you.
    Mark Ferguson
    Replied about 6 years ago
    Great comment! I completely agree and I think many investors who are just beginning want the easy answer, they don’t want to go through all that hassle. Once you do in-depth analysis a few times it gets easier and easier and you start to see what works and what does not very quickly.
    Mark Ferguson
    Replied about 6 years ago
    Great comment! I completely agree and I think many investors who are just beginning want the easy answer, they don’t want to go through all that hassle. Once you do in-depth analysis a few times it gets easier and easier and you start to see what works and what does not very quickly.
    ken lavoie
    Replied about 6 years ago
    Most of the posts I’ve seen re 2% rule do factor up front repairs in (i.e. ARC is used as the price). Most of the posts I’ve seen promote the 2% rule more as an “acid test” vs. a starting point. I have houses that are a little over 1% and a couple MF that are near 4% but I always, even from the beginning, used a spreadsheet (even as a complete newbie). I always used the 2% / 50% rules as “overlays” to quickly determine how my line by line analysis stacked up. My assumption was “if my numbers are correct, the bottom lines should land in the 2% neighborhood. If not, I need to double check to make sure I didn’t forget a zero or decimal point somewhere!
    Greg
    Replied about 6 years ago
    “In many cases renters of single family homes will pay all the utilities, while the landlord may pay most of the utilities on multi family properties.” Hence my preference to buy duplexes with separate meters on each side. I prefer tenants to manage their own utilities. I guess I just don’t get the 2% rule. I haven’t seen property in my local area that supports. My father-in-law who has owned rentals in the same area for 20 years says he has always felt good if he can make at least 1%/month, and he buys units that need maintenance relatively frequently. The units I bought in TX are much better quality with hardly any deferred maintenance, probably because they’re new. They have command top notch rent, probably in the 1% range. Hence my belief in something more like a “0%” rule, where the maintenance costs should be relatively close to nothing. The newer units aren’t going to break down and cost me thousands in new HVAC units, and probably be ideal for even my mother to live in. I fear that to find a property in the 2% rule range, I would have to find something heavily discounted and pour lots of capital into it to get out the rent I want to make it work. Stuff is heavily discounted for a reason, and I just don’t have time to manage that.
    Mark Ferguson
    Replied about 6 years ago
    I completely agree Greg
    Joe Locklear
    Replied about 6 years ago
    Excellent points Greg. You are a perfect example that value is very subjective and YOUR situation is the most important factor in evaluating rental property.
    lisa
    Replied about 6 years ago
    Thanks! I just read a BP article on why the 2% rule was so great for beginners, and saw that he is assuming 2k /month on a 100k home….uh. yeah right. if you are getting 2k in rent, you’re NOT paying 100k for that house! Crazy talk, and too simplistic….too simple…no thought.
    Mark Ferguson
    Replied about 6 years ago
    Lisa, I never see homes in my area with that percentage either.
    Chudi
    Replied about 6 years ago
    Hey mark great article? Do you happen to have a spread sheet on how you calculate 10 year cash flow projections? I would be very interested to see how you do that!
    Mark Ferguson
    Replied about 6 years ago
    Chudi, I wish I did! I use a snowball method on my rentals. I take all the cash flow from my rentals and pay off one mortgage at a time. I have yet to find a spreadsheet that can do that with multiple properties and I don’t know how to make one. I would love a spreadsheet that I could plug in my rental purchases each year, with cash flows and it would calculate mortgage pay offs and yearly income as well as equity.
    Greg
    Replied about 6 years ago
    Great minds think alike! That’s my approach to paying off rental mortgages. Essentially, you can pay each loan equally, or pour the extra into one loan. All things being equal, it has the same net effect dollar wise. What it does for you is moves one proper closer to being free and clear, which opens options. You can opt to sell that unit sooner and harvest more gains, instead of having all those gains spread across your properties.
    Frank
    Replied about 6 years ago
    I would suggest you using an amortization calculator: Amortization Schedule http://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx or Amortization Calculator http://www.amortization-calc.com It won’t factor repairs or taxes and insurance needed into it though. Hope that helps
    Mark Ferguson
    Replied about 6 years ago
    I use Bank Rates mortgage calculator all the time, it is a great tool. What I would love if anyone ever see’s it, is a program that can calculate the snowball method of paying off one house at a time from cash flow derived from multiple houses.
    Greg
    Replied about 6 years ago
    I can see building such a spreadsheet, but it would be pretty complex. You need mortgage formulas applied in multiple cells in order to figure out net effect of pay offs. Imagine taking a balance, applying the interest, deducting the payoff, and then determining the left over cash and have it plugged into another worksheet. Then do the same math on that one. It could take days to build it, but if the net effect is to punch in monthly rents as they arrive and mortgage payments as they go out, and have all your totals automatically calculated, showing net worth growth with no effort or manual effort, it could be worth it! I admit I don’t have that, but settle for a spreadsheet where I add a row every month. Each column represent a different bank account, a different liability, a different mortgage, etc. Each month, after all rents are in and mortgage payments are out, I can see liabilities falling, personal cash rising, and real estimated values growing. Add it all up and I track my net worth growth on a monthly basis. To top it off, I compare current net worth against when I started, then derive annualized growth rate just to see how well my portfolio is growing in total value minus total debts.
    Mark Ferguson
    Replied about 6 years ago
    I forgot to tell you how I calculated it. I wrote it all out by hand. Each year I wrote out how many I want to buy, how much cash flow I would have, how much of my mortgages would be paid off and my total income.
    Joe Locklear
    Replied about 6 years ago
    Chudi & Mark, I have written a very good 10 year projection excel spreadsheet, If you can shoot me a PM, I will email it to you. I am new to BP, but as soon as I have time I will upgrade to a Pro membership so I can post on the docs page. Joe Locklear, Pres ProREIA [email protected]
    Frank
    Replied about 6 years ago
    In deal 1 and 2, where does the Vacancy rate derive from? Thanks
    Mark Ferguson
    Replied about 6 years ago
    Hi Frank, it comes from thin air. It is a number I made up to be constant between the two houses. The numbers in these deals are easy round numbers I made up to illustrate the basic idea.
    Michelle
    Replied about 6 years ago
    Another great article Mark! I can’t meet the 2% rule in my area either, closer to 1%, but I’m positive cash flow using the 50% rule so that makes me happy. Thanks for spelling it out in the two examples.
    Mark Turney
    Replied about 6 years ago
    Great article Mark – good info for a newbie – thank you!
    Michael
    Replied about 6 years ago
    Good article Mark- I agree new investors need learn all the numbers and calculations and research to be successful in this business. If anything the 2% rule is just a quick formula that should take you to the next level of the real research and digging in. The devil is in the details. NO SHORTCUTS !
    Chris Haas
    Replied about 6 years ago
    I really enjoyed all of your articles. I find myself in a similar position in that I make an above average salary, and am looking to buy and rent long term single family homes. That said I haven’t done my first deal yet. It seems to me depreciation could be a large factor in determining profit. Curious how much you take this into account given your other income could potentially be offset.
    Mark Ferguson
    Replied about 6 years ago
    Hi Chris, Tom, gave a lot of great info below on deprecitaion. I personally don’t factor depreciation into my returns, because it can get very complicated with varying tax rates how much it actually saves. I think of it as a bonus. I know how much I am making cash on cash with each property and then I consider appreciation, tax benefits and equity pay down a bonus. (a rather large bonus when they are all factored together)
    Tom Phelan
    Replied about 6 years ago
    Chris, Depreciation can be a hugh factor, 27.5 years for non commercial like SFR, Condos etc. and 39 years for commercial. Remember depreciation is only allowed of the structures etc. not the land. A huge factor is “Recapture of Depreciation” that even many Realtors® know little about. When you sell that “investment property” you must either pay taxes on the recapture of depreciation and at a 25% tax rate or do a 1031 Exchange. I have seen many Investors and Realtors® believe that if the property being sold had no profits then why do a 1031 Exchange? Well, how about deferring taxes on the recapture of Depreciation?
    Greg
    Replied about 6 years ago
    Thankfully, in my situation, cost segregation studies benefit me. They may not benefit you, but they support me. I am saving up a big stock of unused depreciation that may offer me an alternative to either paying a fistful of depreciation recapture or having to undergo a 1031 exchange. Unused depreciation provides a third option.
    Mark Ferguson
    Replied about 6 years ago
    Good info Tom, depreciation is a tax deferment tool, not tax avoidance.
    Chris Haas
    Replied about 6 years ago
    I genuinely appreciate the responses. Seems to me the depreciation has a direct impact on cash flow. I guess cash flow, and Cash on Cash returns are different but to me both seem important. I’ve read a few different articles but this is one of the huge benefits I see to investing. Wouldn’t it be possible in many situations to cash flow positive, but with depreciation actually show a loss? That’s attractive to someone my age (41) with two full time incomes if I’m actually building up equity while being cash flow positive. I’m a complete newbie, although I have spent a great deal of time reading on several sites / blogs etc. Again thanks for your time, I know how valuable someone’s times is.
    Mark Ferguson
    Replied about 6 years ago
    Chris, it is a huge advantage and does effect your bottom dollar. Like I said the biggest reason I don’t actually calculate it is because it is complicated. Depreciation is one of the reasons I think rental properties are a great investment.
    Greg
    Replied about 6 years ago
    “Wouldn’t it be possible in many situations to cash flow positive, but with depreciation actually show a loss?” That’s why rental income is called “tax sheltered”. Depreciation is one of those big benefits of real estate. I wouldn’t craft a spreadsheet where depreciation killed the view of profit. That would be wrong, because you aren’t actually losing anything.
    James Tobin
    Replied almost 6 years ago
    Thanks for the article…I’ll be looking for more bc I really liked how you explained it all. I’m just starting out and reading as much as I can to learn. Your article was really concise and easy to follow except I’m hung up on one part. I can’t seem to figure out how deal 2 shows $10k more in equity. Sorry if I’m missing something obvious but can’t learn if I don’t ask! Thanks again.
    mark ferguson
    Replied almost 6 years ago
    Hi James, the first deal costs 100k but needs no repairs, the second deal costs 60k , but needs 30k in repairs. So the 2nd deal leaves 10k in equity over the first.
    James Tobin
    Replied almost 6 years ago
    Ahhhh…figured it was something simple. Thanks for the quick reply!
    James Tobin
    Replied almost 6 years ago
    Ahhhh…figured it was something simple. Thanks for the quick reply! Reply Report comment
    Jerry W. Investor from Thermopolis, Wyoming
    Replied almost 5 years ago
    Thanks for the article Mark. I just use the 2% rule as an over achievement idea. I have not come any closer than about 1.7 in my area. I have exceeded that on some experimental out of state properties but that is a different matter. So many factors really make the final decision for me such as value if I resale, cost of repairs, age, obsolesence, location, ability to increase value, and even insurance costs. There is also the unfortunate problem of opportunity knocking when the cookie jar is empty. When I actually have some $ it doesn’t take long for me to find another project.
    Sarah Rune Real Estate Investor from Ventura, California
    Replied over 4 years ago
    Excellent article. Thank you for posting!
    Gary O
    Replied over 4 years ago
    Great article Mark, The number of responses and the quality of feedback is evidence that you have done a really good job on a subject that a lot of people needed input on. Evidence is the critical word here because the only homes for sale in my area that could do the desired #’s would still have the police ribbon up. Although I know that the more experienced investors have crews and can buy materials for repairs much cheaper and faster than I can. In that same vein they are generally doing multi-family and apartment complexes to pull better averages from. So for me I just want a decent neighborhood,value I can add, and a rent value that can make money within the same amounts as renters expect to pay.
    Travis H. Investor from Social Circle, Georgia
    Replied over 4 years ago
    One teensy editing suggestion (since editing help is something I know I can contribute to the BP folks): The comment you saw piqued your interest, not peaked.
    Jeffrey Hare Professional from San Jose, California
    Replied over 3 years ago
    Yes, “Get it in Writing.” The court dockets is overflowing with cases involving disputes between partners who started out with a dream and ended up with a nightmare. Unwinding these ventures, when the parties no longer agree as to the value of their partner’s contribution(s), takes time and money, and whatever equity or value may have been built up is quickly squandered while the dispute grinds its way through the judicial process. It’s basically a contested divorce proceeding in every way. Marcus is absolutely right – do an honest assessment of yourself and your partner, put it into writing, and I would just add to include an escape clause – a provision for an orderly and fair way to shut down the process if the parties cannot agree at any time in the future.
    Marcus Maloney Rental Property Investor from Queen Creek, AZ
    Replied over 3 years ago
    Jeffery, Great imput your knowledge is always welcomed. When going indepth with your partnership it is mandatory all agreements be in writing. The escape clause is great, what we do if we are jving on a buy and hold we agree that if the property appreciates to a certain point we have an agreement to sell. Thanks again for your imput. “Enjoying the Journey”
    Peter Mckernan Residential Real Estate Agent from Newport Beach, California
    Replied over 3 years ago
    The article was great Marcus! The fear gets in the way at times and it seems to take over everything that you were there to do! Keep your mind open and the limitations will be minimized as much as you think of growing!
    Nancy
    Replied over 3 years ago
    Hello Marcus, You touched on some good points. A working partnership with a spouse has similar issues, but can benefit one’s strength and weaknesses. Thanks. Nancy
    Nancy
    Replied over 3 years ago
    Hello Marcus, You touched on some good points. A working partnership with a spouse has similar issues, but can benefit one’s strength and weaknesses. Thanks. Nancy
    Curt Smith Rental Property Investor from Clarkston, GA
    Replied over 3 years ago
    Agreed agreed! This topic could fill 2 books if one where to cover screening investors for accredited, sophisticated, none-of-the-above. Structure; JV agreement with or without a project specific LLC and finally an SEC reg D filing using an SEC attorney often creating a syndication the best strategy for larger deals, say over $1M and the investors (or lenders) are passive non-real estate experts. There’s other reasons to do serial JVs besides OPM. If the in-experienced can put together a deal with a more experienced partner I feel it’s well worth the work and time cost to “learn”. But if it’s just for OPM then I have other thoughts. Beware borrowing from or wanting to Joint Venture with folks who are not expert in real estate deals and risks. They can claim ignorance and you mis led them on the risks. Which why a JV agreement must have at the least this sentence: “real estate investing is risky, you can loose some or all of your investment”. You need to have them initial this sentence! You do not want to take funds from someone who is not a real estate investor is the simple and safest tip. The best person to do a JV with is one who meets the criteria of “accredited”, assets exceeding $1M excluding primary residence AND has income of >$250k individual or $300k as a couple (if memory serves). The 2nd best is “sophisticated” and I forget those criteria. The worst person to JV / take funds from is someone does not know real estate, you are taking a majority of their savings and are risk adversed. Some times it’s wise to say no even if they offer to be a partner. I’ve done a JV with a “peer” on a well written JV contract that has the needed disclosure pages (many pages). I’ve also done a project specific LLC and the JV agreement was written into the operating agreement. In both cases an Attorney was involved to write the key document. Some states, like GA, have exemptions to “you are selling a security” if you keep your deal simple. Some states OR, OH, WA and many more do not give you an exemption. Some states exempt from being a security: – one investor / lender – The investor is someone you knew prior to the deal – no advertising (re the above) – investor is in a 1st lien, note and possibly a JV agreement It’s a grey area and would take consulting an Attorney how one sets up business agreements and structure to do JVs in the restrictive states like OH, OR, WA and others. No state can get in the way of “peers” doing business. The problems arise from business relationships between un-equals. IE Grannie lending you 90% of her life savings for your flip. This is a security except in states with an exemption, and even then it is NOT a good idea to take but a fraction of the partners / lenders assets (10% or less) or get involved with someone who is risk adversed. I’m hoping other BPers who have done JVs will chime in giving their experiences pro and con. The number one issue for our JVs has been: we did all the work and got less than 1/2 the benefit. One might think that 1/2 was better than nothing and for new folks that might seem like the case. But the more experienced you get the more you value your time and effort. Right now I’ll JV on very big deals and on the small deal end: I’ll enjoy time at home vs at a project if I can’t fund a deal 100% myself.
    Curt Smith Rental Property Investor from Clarkston, GA
    Replied over 3 years ago
    Agreed agreed! This topic could fill 2 books if one where to cover screening investors for accredited, sophisticated, none-of-the-above. Structure; JV agreement with or without a project specific LLC and finally an SEC reg D filing using an SEC attorney often creating a syndication the best strategy for larger deals, say over $1M and the investors (or lenders) are passive non-real estate experts. There’s other reasons to do serial JVs besides OPM. If the in-experienced can put together a deal with a more experienced partner I feel it’s well worth the work and time cost to “learn”. But if it’s just for OPM then I have other thoughts. Beware borrowing from or wanting to Joint Venture with folks who are not expert in real estate deals and risks. They can claim ignorance and you mis led them on the risks. Which why a JV agreement must have at the least this sentence: “real estate investing is risky, you can loose some or all of your investment”. You need to have them initial this sentence! You do not want to take funds from someone who is not a real estate investor is the simple and safest tip. The best person to do a JV with is one who meets the criteria of “accredited”, assets exceeding $1M excluding primary residence AND has income of >$250k individual or $300k as a couple (if memory serves). The 2nd best is “sophisticated” and I forget those criteria. The worst person to JV / take funds from is someone does not know real estate, you are taking a majority of their savings and are risk adversed. Some times it’s wise to say no even if they offer to be a partner. I’ve done a JV with a “peer” on a well written JV contract that has the needed disclosure pages (many pages). I’ve also done a project specific LLC and the JV agreement was written into the operating agreement. In both cases an Attorney was involved to write the key document. Some states, like GA, have exemptions to “you are selling a security” if you keep your deal simple. Some states OR, OH, WA and many more do not give you an exemption. Some states exempt from being a security: – one investor / lender – The investor is someone you knew prior to the deal – no advertising (re the above) – investor is in a 1st lien, note and possibly a JV agreement It’s a grey area and would take consulting an Attorney how one sets up business agreements and structure to do JVs in the restrictive states like OH, OR, WA and others. No state can get in the way of “peers” doing business. The problems arise from business relationships between un-equals. IE Grannie lending you 90% of her life savings for your flip. This is a security except in states with an exemption, and even then it is NOT a good idea to take but a fraction of the partners / lenders assets (10% or less) or get involved with someone who is risk adversed. I’m hoping other BPers who have done JVs will chime in giving their experiences pro and con. The number one issue for our JVs has been: we did all the work and got less than 1/2 the benefit. One might think that 1/2 was better than nothing and for new folks that might seem like the case. But the more experienced you get the more you value your time and effort. Right now I’ll JV on very big deals and on the small deal end: I’ll enjoy time at home vs at a project if I can’t fund a deal 100% myself.
    Carlos Cortez Investor from San Diego, California
    Replied over 3 years ago
    Hello Everyone i just signed up last night and so far i have learned so much from tjis group. Im An experinced Realtor here in sunny san diego, i have flipped about 14 deals succesfully, Im thinking of forming a group of investors and other people wanting to know more about this lucrative business,we could colaborate and help each other. I belong to brokerage where we have property management who is up for it? please call me 6195722940 carlos cortez