Partnerships: What to Do Before You Jump in With Another Investor

Ashley Kehr:
This is Real Estate Rookie show number 73.

Tony Robinson:
We trust each other to make those decisions, right? Like I mentioned earlier about staying in your lane. I don’t really tell her how to design the properties, right? But she doesn’t tell me how to go out and find the properties or underwrite them, right? So I think having those duties and responsibilities helps relieve some of that potential friction.

Ashley Kehr:
My name is Ashley Kehr. And I’m here with my co-host, Tony Robinson. And today’s going to be very different because Tony and I are actually sitting at the BiggerPockets headquarters recording this right now.

Tony Robinson:
This is crazy. We’ve been reporting for what? Four months now, we’ve never met in person, our first episode actually in the same space, I’m super excited.

Ashley Kehr:
And then it gets even better. We brought our business partners with us to bring them on to the episode and we’re going to talk all about partnerships. What does a rookie need to know to get a partner, how to structure your partnerships and all the ins and outs. So who better to ask than our own partners?

Tony Robinson:
So I guess let’s bring up our partners, right? So I guess I’ll introduce mine which is my lovely wife. Why don’t you introduce yourself to the BiggerPockets audience?

Sarah Robinson:
Oh my gosh. You guys, I’m so excited to be here. I’m a big fan of the show. And obviously my husband and Ashley. So my name is Sarah, officially Sarah Robinson. So yeah, I’m his partner and his wife and the one that gets things done. So…

Tony Robinson:
Ashley who did you bring to the show?

Ashley Kehr:
Yeah. So, I have Joe [Krieger 00:01:29] with me. And we started investing, four years ago, maybe?

Joe Krieger:
Yeah, three or four years ago.

Ashley Kehr:
And we probably have known each other six years maybe. But Joe owns a couple businesses and some rental properties on his own. And then we have a bunch of properties together. He is all of the construction, the rehab side of things. And then I also am the one that gets stuff done.

Tony Robinson:
So Ashley, people always talk about the potential benefits or downsides of investing with a partner. But I think you and I are prime examples that there is a way to do it the right way. So in addition to my wife, Sarah, we have a third partner who Sarah’s cousin, and he’s kind of the third leg of our tripod to manage our investments.

Ashley Kehr:
To kind of start from the beginning, for a rookie investor that maybe wants a partner, is considering it, what are some of the things that they should think about before they decide if they need a partner?

Tony Robinson:
I think the first thing is, you want to identify what your particular strengths are, right? I know the things that I’m uniquely skilled to do. And I know the things that I’m not really good at, or that I have no desire to be good at. So for me, it was really about trying to find a partner that complemented my skill set. And for us in the Airbnb space, where the majority of our investments are held now, Sarah my wife, and then our third partner her cousin, they do a great job of handling all the parts of the business that I suck at.

Sarah Robinson:
Yeah, that he really sucks at. Like communicating with our guests. He’s just so busy on his phone all the time that he will easily miss a message which will in turn affect our reviews. So that’s me, I’m the guest relation. I call myself the guest relations manager. So yeah.

Ashley Kehr:
Joe, you have a couple partnerships with your dad, with me. What’s something that you see in a partner?

Joe Krieger:
That I look for?

Ashley Kehr:
Yeah.

Joe Krieger:
Just someone whose strengths are my weaknesses. I’m more of a hands-on type person and you are the bookkeeping, the phone calls, talking to the bank or the utility companies to get things going.

Ashley Kehr:
Basically, the back end stuff, and then Joe does the physical labor.

Tony Robinson:
Yeah, but Joe, did you recognize that and actually early on, that she was someone who complimented you? Or how did you make that connection?

Joe Krieger:
Absolutely. I failed miserably beginning, at communicating. I let things slip through the cracks and she would catch them. And as time went on she realized that too, and she caught it right away. And she just said, “Joe, I will take care of this. You just take care of all that.” Everything hands on.

Ashley Kehr:
Whose idea was this podcast. I’m loving all the compliments. [inaudible 00:04:11]. But really, I started buying a property in South buffalo. And then Joe bought one a month later. And so we analyzed those deals together. And that’s what kind of got our head spinning like, “Maybe we should partner on some properties.” We’re very like-minded in a sense where we know where real estate investing can take us. And we have the same alignment, the same goals as to what we want real estate to do for us. So I think that was a big impact too. So finding someone like that.

Tony Robinson:
So I want to obviously talk about how you guys actually connected with each other because I think that’s a big question that new investors have. But before we do, I just want to finish up the conversation on identifying your skill sets and what your strengths are. Ashley, were you actively looking for someone to fill in your weaknesses? Or were you just oblivious? Was it a pain point for you?

Ashley Kehr:
Well, not really. At first, I wanted someone to talk real estate with. I don’t think at that point, maybe Joe had signed up for BiggerPockets. But no, we weren’t active members of it.

Joe Krieger:
I’d been a member longer than you have. I wanted to make that [inaudible 00:05:23].

Ashley Kehr:
For me it was like, I found a friend that loves real estate investing too. This is someone I can talk to. So that was the biggest thing for me. Because even our first property, we did nothing. We put a new fridge in it. So it wasn’t like we needed to rehab, but then he did the maintenance for a while on the property.

Tony Robinson:
Got it. So how did you guys actually connect with each other? I think that’s the biggest question that rookie investors have. She’s my wife. So that was pretty easy for us to become partners. But for you two, you didn’t really have a substantial connection before, how did you connect?

Ashley Kehr:
I was working for his wife’s dad. And so, his wife wanted to learn about it. And he was already investing. So, they weren’t married at the time. But they would come into my office and want to learn about property management, and I would teach them and then we just got to know each other through that-

Joe Krieger:
And started looking at properties together and we’d go look at them. And I would be the one that more looked at the structural end of things.

Ashley Kehr:
And I would run the numbers, analyze it.

Joe Krieger:
I’d look at the roof, the basement, the floor joist, make sure everything was intact and it didn’t need a major repair. And then she would run all the numbers.

Tony Robinson:
Whose idea was it to partner up first? Was it yours, Ashley? Was it yours, Joe?

Ashley Kehr:
I don’t know. I found all of our deals. So probably my… And I never let him forget that either.

Tony Robinson:
Well, what did that look like? Right, so when you found that first deal, were you like, “I think this one might be a good one for me and Joe.” Did you just shoot him a text and say, “Let’s go look at it.”

Ashley Kehr:
I don’t even remember really. I remember my first partner, how we did it. But for me and you, I think we just were talking real estate constantly. We never talked about anything else and we didn’t even know if either of us had any other hobbies.

Joe Krieger:
We just said, “Hey, do you have money you can put in?” And I said, “Yeah, I guess so.”

Tony Robinson:
I want to share. So obviously, we have a third partner, I said. And the way that we did our first deal with him, it was through a BiggerPockets calculator report. So I’d had a deal, my first deal was under contract. But before putting that deal on the contract, I had submitted a deal on another property, probably two months before but I’d never heard back from the seller. So I forgot about it, you submit the offer, don’t think about it.

Tony Robinson:
In the middle of my rehab on my first property, and then two or probably a month into that rehab, I get a note back from the agents and that first offer that I put in a couple months ago was accepted. So I’m freaking out like, “Oh my God. What am I going to do? I can’t do two properties at once.” So I had already run it through the calculator. I emailed it to her cousin. I said, “Hey, we’ve kind of talked about investing, would you be open to it?”

Tony Robinson:
And this was 12:00 at night. And he replied at 12:05. And he was like, “I’m in.” And that’s how we kind of got started as well. So the calculators are big to help find that partnership.

Ashley Kehr:
Sarah, what about you? When did you come on board and become a partner?

Sarah Robinson:
Yeah, I was going to chime babe. He said Oh, I’m his wife, “So that automatically makes me your partner?” Ew, no I was not interested in real estate at all. When he was doing those-

Tony Robinson:
Long-term rentals.

Sarah Robinson:
Long-term rentals, I had no interest. So those of you guys listening, if you are trying to get your husband or wife on board, don’t automatically assume they are on-board because it might not be interesting for them. It wasn’t for me, until Tony decided to go into the short-term rental space, which I’m kind of aware of, just because we’ve stayed and traveled places that have Airbnb. So that kind of piqued my interest. And that’s when I got involved. So…

Tony Robinson:
But even for you babe, what was it about short-term rentals that made it more interesting than long-term rentals?

Sarah Robinson:
I think just because it’s up to us to create this hotel experience for people. And I come from a background of special events, marketing, promotion. So that’s my specialty, creating these experiences for people. So I just felt like, “Oh my gosh, this is my thing. I know how to do it. I’m good with people.” So I felt like I could actually add value to the team. So that made me excited.

Tony Robinson:
And I guess for… Because we get this question all the time, right Ashley? About, “How do I get my spouse on-board?” And if you can find a way to connect their interest with the real estate investing, that’s a huge way because you were all in once you kind of found that piece that you really enjoyed.

Sarah Robinson:
Yeah, and if you feel like you can actually provide value. I felt like I didn’t want to just help decorate because you suck at it. I wanted to feel like I can actually decorate it so freaking cute that it’s going to be booked 24/7. So, I think the combination of the both.

Tony Robinson:
So Ashley, what about you guys? So I know you’ve got this thing that you called your partner presentation. I think that’s helped you get some partners in past. Walk us through what that is.

Ashley Kehr:
Yeah. So a partner presentation is basically a binder where you go and put in all of your financial information possible. Bank statements on yourself, you put in your tax returns, you put in your Credit Karma report, you put in your personal financial statement. And then also include any deals that you have done. So include the BiggerPockets calculator reports. I remember our very first deal, that’s what we did, we used the BiggerPockets calculator report and we took it to a loan officer and showed it to him and he was pretty impressed.

Ashley Kehr:
But then include photos of the property, or even if you don’t have deals that you haven’t done and this is your first one, includes some deals that you’ve analyzed and things you want to go after. So I’ve done that when I’ve presented to other partners or to private money lenders. I’ve put together a little packet so that they can see a little bit about me. I want them to trust me and know that I can manage my own money before I’m going to manage our money as being business partners.

Tony Robinson:
Joe, I guess a question for you. Had you partnered with anyone else before partnering with Ashley in real estate?

Joe Krieger:
No, not in real estate.

Ashley Kehr:
Except for your dad and the [inaudible 00:11:09].

Joe Krieger:
Oh yeah, that’s correct.

Tony Robinson:
But your dad, he’s your dad.

Joe Krieger:
He was basically a silent partner, to get the funds going for me, which worked out well. I took care of everything and he just took a monthly cash flow. [crosstalk 00:11:23]. He was happy with it, so he was glad to help me out and get my snowball rolling with the real estate.

Tony Robinson:
Now, have you ever had maybe a partnership, either in real estate or in your other business ventures that didn’t work out how you wanted it to?

Joe Krieger:
No, nothing has never worked out. Nothing major anyways. We’ve always worked things out and things have gone smoothly.

Ashley Kehr:
And we’ve never really had an issue. We know what we’re bad at. So we call each other out constantly on those things. To us it’s like, if I call him out on something, he’s just like, “Yeah, I know. I’m not good at follow up,” and I will be like, “I know, but I just wanted to yell at you,” and then we move on.

Sarah Robinson:
You guys sound like us.

Tony Robinson:
What about your other real estate deals Ashley? I know you’ve partnered with other folks outside of Joe as well, have all of those deals gone smoothly? Or do you have any negative experiences that you can share?

Ashley Kehr:
So with my first partner, I’d go back and forth like, “Okay, do I keep investing with it? Or do I not?” It really depends on the day, I guess. But I would say that partnership isn’t as solid as mine and Joe’s, just because I do everything for that partnership and that person is more the money. So what I really like about mine and Joe’s is that, it’s not just my input, it’s getting both of ours. And I really value Joe’s opinion and his experience, when we’re looking at deals and when we problems come up, it’s really nice to have someone else to bounce ideas off and to do this crazy real estate journey together and build an empire.

Tony Robinson:
I just want to hear quick story about when you shouldn’t partner with somebody, right? Because entering into a partnership, especially with real estate, when you’re spending several hundred thousand dollars, that’s a big investment to make with someone. So, we had someone that wanted to partner with us on buying a short-term rental, and he was going to be a big capital partner for us. But we have very specific ways we partner with people. We know how we want to structure the deal, we know roles and responsibilities that we want to have.

Tony Robinson:
And he was trying to really kind of change and not really go along with what we wanted. And we had to kind of take a long pause and think, “Okay, is this someone that we really want to partner with?” Even if they have the capital, if they don’t align with what our goals are or what we want from a partner, then maybe they’re not the right fit for us. So, you have to have the courage I think to understand who’s not a good fit for you as well.

Ashley Kehr:
I think that’s a great point, because there’s always going to be other partners. You don’t have to just that first person with money that comes to the table, you don’t have to partner with them. I mean, your partnership is like being married, you’re financially tied to that person, you guys are liable together for those properties. So I think that, definitely take your time and vet your partner and run a background check, a credit check. I did that on you.

Joe Krieger:
I don’t know why you’re my partner.

Ashley Kehr:
No, but we’ve always been so open with each other about our financials. I just switched some of his retirement accounts into Vanguard, because I wanted him to be investing and then we talked about it, he’s like, “Yeah, that’s a good idea.” And he is logging info and-

Joe Krieger:
I trust her completely. “All my tax information, here you go. Do whatever you want with it.”

Tony Robinson:
And you had to have that transparency.

Ashley Kehr:
So I opened the [inaudible 00:14:42] credit cards and the [inaudible 00:14:44].

Tony Robinson:
What about [inaudible 00:14:48] goals are pretty important to you when you have a partnership. And I think Sarah and I benefit, because we’re married so we talk about our life goals a lot. I mean, once you say were-

Sarah Robinson:
Yeah, Tony’s the goal talking… All he wants to talk about is goals, So okay, yeah.

Tony Robinson:
But it’s important, because I feel like even in the business sense, we’ve been having a lot of discussions lately about, “How big do we want our business to get.” And we have to be aligned as a partnership to make sure, because if I want to be at a thousand units and she only wants to be at a hundred, then there’s going to be a disconnect there.

Sarah Robinson:
Yeah, we’re thinking about babies. We’re like, “Okay, we need to plan for that. What’s our goal?”

Tony Robinson:
So how do you guys handle as a partnership, aligning on what your goals are?

Ashley Kehr:
Well, we just started actually doing monthly meetings with our supervisor who’s kind of overseeing most of our businesses and rental properties. And then with our bookkeeper. So that’s been interesting to start to that. But I mean, we pretty much talk every day about real estate. Because I’m sure you guys do too. So it’s kind of an ongoing thing, “Hey, I learned about this doing this strategy,” or, “This is how we could change an offer.” It’s pretty much an ongoing basis for us. Do you guys do alignment meetings, or goal meetings like, “Okay, we’re going out to dinner and we’re just going to talk about our goals,” or anything like that?

Sarah Robinson:
Same like you said, I feel like we talk about real estate so much that I get really excited when we don’t talk about it. No offense. I love what we do. It’s super exciting. But can we just turn it off for a second? And just pretend we’re married again?

Ashley Kehr:
So that’s interesting, that you’re bringing your work home. Because you both do this from home. So how do you kind of balance that out? Are there times where you say, “Okay, we’re going away for the weekend, no business talk.” Anything like that?

Sarah Robinson:
Yeah, I think it’s moreso me that likes to shut it off. I think Tony is just so fully interested and invested in real estate. So he enjoys it more than I do. But he’s a good sport. And when I snap at him about being too annoying about real estate, he’s good about taking a step back and just unplugging a little bit.

Tony Robinson:
And I think it’s important for me too, because a lot of the reasons why people want to invest in real estate is because they want financial freedom and they want the freedom of time. But you can very quickly and easily turn real estate into a full-time job for you if you allow it to be. So a big focus for me is that as we continue to build our businesses, that we build it in a way that allows us to maintain that freedom of time.

Ashley Kehr:
Joe, I want you to kind of tell our story just over the past year, of how that has completely shifted for us, with our property. Starting with the [crosstalk 00:17:27].

Joe Krieger:
Well, since you’ve become a celebrity, she shows up at a job site. You got to roll out the red carpet for her. She has a limo drop her off. Sometimes she’s kind enough to bring us lunch.

Ashley Kehr:
He would be so annoyed last winter when I was would just do Instagram videos. He was like, “Don’t put me in those.” But just how we spent all last winter rehabbing and how that’s changed for you.

Joe Krieger:
Yeah, we’ve come a long way. And I’ve always been one to put sweat equity. I like to work with my hands. I love to work, I work every day all day, that doesn’t bother me. But the more we get involved into things and spread ourselves out, it’s nicer to not have to do that. We’ve been hiring things out lately and just we have to go to Lowe’s to get some material, but that’s about it.

Ashley Kehr:
That’s all we do right now for our current rehab. And that’s just because there’s no close Lowe’s or Home Depot near the property. So we would rather take our time to go and deliver the materials then pay our contractor to leave the site, go get it and come back.

Joe Krieger:
And yeah, it’s more costly, but it does give you more freedom to delegate other [crosstalk 00:18:40] for you.

Ashley Kehr:
Yeah, to get it up. So it’s been really different for us. And we planned to do this rehab, all of ourselves. We bought it in June. And so we did pretty good for a couple months and then we knew this was coming. But Joe decided to build his own house. And so we halted our project so he could start and then it was probably about two more months till we finally got our full-time contractor in there and work started up again and we’re almost done. But that was an important part of finding a good partner and having a good relationship, because we stopped our projects so he could do what he wanted. Yes, I gave him a hard time about it constantly.

Ashley Kehr:
We’re still partners and whatever. I knew there was a chance that that was going to happen. It’s not like you woke up one day I was like, “I’m going to build a house.” But yeah, so I think having a partner where you can be flexible around your partner and make sure that you’re okay if for some reason they can’t commit to something or anything like that. But you also want to… I mean, he was I think more upset than me that he had to start his house and kind of finish the other house. He felt so bad.

Joe Krieger:
I put myself under a lot of pressure, but we have positive attitudes and knew that it would all work out in the end. And so far it’s going.

Tony Robinson:
The benefit of having a partner, right? Is that you have someone that you can trust, someone that you can lean on, someone they can step up for you if your life gets a little bit busy and just really a sounding board. Obviously, Sarah is still kind of learning all of the, I think technical side of real estate investing but I still bounce so many ideas off of her in terms of, “What should we do in this situation? Should I partner with this person? Should we go after this deal?” And to have someone who’s just another set of eyes to kind of go over these questions and concerns is so beneficial.

Ashley Kehr:
How do you guys do your partnership structure? So there’s three of you in your partnership, and how are those duties, responsibilities kind of divvied up?

Sarah Robinson:
So, I would say Tony is… I categorize him as our IT guy. So he’s the brains behind setting up or choosing the… What is it called? What’s the fancy words you real estate people say? Acquisition?

Tony Robinson:
Yeah, acquisition.

Sarah Robinson:
Acquisition. So he picks the house, the loan stuff, all the boring stuff. And then my cousin [Omid 00:21:06], he is the one that really sets up the property. So setting up utilities, hiring the handymen, delivering all the orders. We set up a lot of our properties remotely. So he pretty much handles all of those duties. And I’m the one that publishes the listing on Airbnb, hires the photographer and coordinates the cleaners and all of that stuff. And then from then on, I’m kind of the one that carries out the property for the rest of the time. So I would say Tony is the one that picks the properties, Omid is one that gets it started and I’m the one that manages that.

Tony Robinson:
Yeah. That’s a fair assessment, right? And I do a lot of the communication with our partners, right? That’s a lot of work in and of itself. And they allow me to do that and focus on kind of being the face of our brand.

Sarah Robinson:
He’s also a celebrity now. So…

Ashley Kehr:
So did you guys know right away when you went into this partnership, that that was going to be how your roles were…

Tony Robinson:
I think we knew early on that we wanted Sarah to be the person-

Sarah Robinson:
They scouted me. Tony kept encouraging me to quit my job. And I was like, “Okay, this must be going really well.” And then, they laid it on me like, “Okay, we think you need to do this for us and you will really help our business in that way.” And I was on board because again, I thought I could bring value and I knew it would be good at it.

Tony Robinson:
Yeah. But I think early on, we knew that we wanted her to be the person communicating with the guests. But, all the other pieces, it was super messy when we did our first one. We were double doing work, things were getting forgotten

Sarah Robinson:
We would all set up electric.

Tony Robinson:
So many things like that happened. But now we’ve set up so many of these that we’ve got it pretty dialed in to where everyone knows what their specific duties and responsibilities are. They all know what they’re accountable for. And it’s really a smooth process.

Sarah Robinson:
No, Tony already… I mean, you also did what an org chart for us. And that was helpful. Just so we were very clear on what our duties were and expectations. And we don’t have to constantly text each other saying, “Hey, did you schedule electric to come today?” We already know whose job that is.

Tony Robinson:
So I just want to pause on that. Because I feel like it’s been really helpful for us, as we’ve grown. So I pulled this from the E-Myth by Michael Gerber. If you guys haven’t read that book, it’s called the E-Myth Revisited, by Michael Gerber. And in that book, one of the things that he suggests is that you put together an org chart for your business, no matter how big it is, no matter how many employees you have, there’s certain roles that need to be played within your business.

Tony Robinson:
So I spent some time to do that. We’ve got three different parts of our business. We have operations, we have finance, we have marketing. And within those, there’s a bunch of different positions in there. Now, all of those positions either say my name, Sarah’s name or our third partners name, right? We all hold many different hats, but as our business continues to scale, we know that we’re going to start plugging people in. So we just hired our first virtual assistant, they’re going to be working in the finance department, doing some basic bookkeeping. As we continue to scale, we’ll plug people in. But we wrote up job descriptions and roles and responsibilities for each one of those. And that’s helped us kind of manage all the different things that need to be done.

Sarah Robinson:
I love that. I love doing the org chart and really defining what everybody’s responsibility is, because, especially as you grow, things can get lost or, “Okay, you were supposed to do that. Well, I don’t remember you telling me that. Okay, well look, here it is, in your job description.” Just like having a really good operating agreement between you and your partners, it can save a lot of trouble down the road, laying everything out on paper from the very beginning.

Tony Robinson:
We also use Wrike. And I know we’ve talked about this before, but it’s a property management software. And we have everything we need to get set up or to get a property set up is inside of that software. And we assign tasks to people and we can communicate in there. So it’s another way that we kind of manage duties and responsibilities. She’s smiling because she’s not too good at [crosstalk 00:24:51]-

Sarah Robinson:
I hate it.

Ashley Kehr:
That’s Joe and a sauna. We used to sauna for that and be like, “Okay Joe, look at your phone, you have 30 notifications.”

Sarah Robinson:
Oh my God. Damn it. Tony assigned me to something else.

Ashley Kehr:
Yeah, you thought that we have a contract or we don’t use it. But I feel like it’s so funny because my property management, the leasing is very defined and then he was the maintenance and would look at the properties, “Okay, this is what we would need to do if we buy it.” So I think one thing that was really nice about us, we had our defined roles, but I mean that didn’t mean he never showed a property or never had to collect rents or anything like that. We’ve been very good at taking over each other’s responsibility if we need to.

Joe Krieger:
Whatever needed to be done, we would do it. If I had to do something that she is normally used to doing, that’s fine. If it couldn’t be done, we would do it.

Ashley Kehr:
And then even now, now that we really aren’t doing a lot for our business, because we outsource A lot of it. I feel like it’s even more now. Like the contractor calls us, whoever he calls it’ll be random. Like today, he called Joe, the other day he called me, and if we can’t do it, then we just text the other, “Hey, you’re going to be going out that way. Can you do this?” Or, “What’s your decision on so?” Now it’s really just we talk about it quickly through text and then make a decision.

Tony Robinson:
What about operating agreements? You mentioned that you guys have that for your partnership, what does that look like? What is the purpose of it? And should we all have it for our partnerships?

Ashley Kehr:
Yes, so we have an LLC together. So if you want to kind of talk about why we decided… Yeah, we have two LLCs and one corporation. You want to talk about why we did that?

Tony Robinson:
You can.

Ashley Kehr:
Okay. [inaudible 00:26:37], I’m the one that wanted it. So basically, an LLC just provides you some liability protection. And the reason I like it for a partner is because, then you and your partner are in that LLC. So if something were to happen, you’re sued or whatever, they can’t go through each of your other personal assets. So for, especially with a partnership, if the partner does something and makes your LLC liable, that doesn’t mean they can come and take your home then. Where, if you and your partner own a property in your names, you both are personally liable for that property. So I really like to recommend in a partnership, having an LLC. So, we created a couple LLCs and we basically just did it off of ownership interest. So we are 50/50 on our first property and then we have I think maybe three properties in that LLC. And then we have two properties and another one where I’m 60% ownership and he has 40% ownership, just because I’m way cooler.

Ashley Kehr:
But that’s the thing too about us, is for that property, I found it, I actually acquired it and then I approached him to be my partner and I put in all the cash and then he was going to do the rehab. And it was kind of like I was putting more into this deal initially. And I feel like that wasn’t fair, he probably ended up doing more instead.

Ashley Kehr:
But we were open to changing and to making our partnership different. And that was just creating another LLC. But for operating agreement, we got it from our attorney. And we just kind of plugged some things in that we personally wanted to happen there and just changed it to how we wanted. But we never had to really refer to it at all. “Oh Joe, in the operating agreement, it says you can only take 50% of the cashflow.”

Joe Krieger:
It works out well because it states that she does 90% of the work and I receive 90% of the profit. [crosstalk 00:28:43].

Ashley Kehr:
So what about for you guys, for your operating agreement? Do you have life insurance policies on each other?

Tony Robinson:
No, we don’t. No, that’s like a little ninja trick that we got to look into. We set up an LLC but the majority of our properties actually are held how you told us not to, right? So we’re doing vacation homes, so you can’t buy them in an LLC. So right now, it’s either in my name or his name or in his wife’s name. But we still have the LLC operating agreement that oversees all that.

Ashley Kehr:
I think the difference is though, it’s just in one of your names. It’s not both of you on the property together. So I think that does make a big difference.

Tony Robinson:
Awesome. Yeah, that’s how we set it up.

Ashley Kehr:
With the insurance though. So I highly recommend this to anyone who’s doing a partnership, is get life insurance on your partner. So what you do is, you actually have the LLC, get the policy. So we’ll use Sarah and Tony as an example. They’re married, but pretend they’re not married for this scenario. And Sarah passes away. So her husband Ken doesn’t want to be partners with Tony. So Tony has the life insurance policy on Sarah and he takes the proceeds from that to buy out Sarah’s husband Ken. So Ken is happy. He has a big amount of cash that Sarah worked hard for being a partner in this LLC. And Tony and Ken don’t have to be partners. And then Tony gets to be 100% owner of the LLC, and he didn’t have to come up with, “Oh my gosh, how am I going to get $100,000 to buy Sarah’s husband out of this partnership?” It comes from the life insurance proceeds. So that might be good only for your third partner for you guys to get it on him and vice versa.

Tony Robinson:
I’d want to watch out Joe. She [inaudible 00:30:18].

Joe Krieger:
If he knows my signature, my social security number, I’ll be dead.

Sarah Robinson:
And all that was so confusing to me, you guys. I was just smiling and nodding that, “I hope the listeners got that,” because I’m sitting here like, “Whoa, that was fancy stuff.”

Ashley Kehr:
Okay, let’s break it down then, this is great that you’re saying that.

Sarah Robinson:
I’m sitting here googly-eyed just nodding at Ashley.

Tony Robinson:
Before we begin, I just want to point out to you, right? That’s the value of having a partnership, right? Is that she doesn’t need to know or be an expert in those parts of the business because I handle that part, Omid, our third partner handles that part. That’s the value of being in a partnership, I wouldn’t recommend this, but you can be totally oblivious to certain parts of the business but you know that someone else is holding it down for you.

Sarah Robinson:
That you trust in.

Tony Robinson:
That you trust, right? Yeah.

Ashley Kehr:
Yeah, I definitely agree with that. We are the same. There’s no point in recreating the wheel. Okay, I learned how to install vinyl plank flooring but there are some things, like he does concrete for living in the summer, does concrete jobs. And it’s like, I would never say, “Okay, I need to learn this skill because we might want to pour concrete patio at one of our properties. Teach me from start to finish.” There is no need for me to know that. And just with him like bookkeeping, there is no need for him to know how to enter a bookkeeping entry.

Joe Krieger:
Yeah, if you try to help me with concrete, you’ll just get in the way. Vice versa with me trying to help with bookkeeping, I’m better off staying right [crosstalk 00:31:49]

Tony Robinson:
And that’s so true. Like insurance, I don’t handle any of the insurance on our properties. Omid our partner, he works in insurance for his day job. He handles all that stuff, right? You asked me what our insurance policies are? I have no idea, but he’s handling that part.

Ashley Kehr:
Okay, so Sarah, let’s talk about the life insurance.

Sarah Robinson:
Oh my gosh. [inaudible 00:32:09].

Ashley Kehr:
No, okay. So do you and Tony have life insurance on each other right now?

Sarah Robinson:
I literally have no idea.

Ashley Kehr:
Okay. So what’s something [inaudible 00:32:18]. You can purchase life insurance for yourself, for others. And basically, when that person passes away, you get a term policy. So it’s good for 20 years, and if that person passes away within 20 years, you will get that lump sum, whatever amount you pick when you sign up for the policy. Okay? So if Tony were to pass away, pretend he is in another… Or we should use me and Joe as an example. Okay let’s do that.

Ashley Kehr:
So me and Joe, okay? I get a life insurance policy saying that if Joe dies, I get $100,000. Joe gets one, the same for me. If I die, he gets $100,000. But the way it’s put, is the LLC actually owns that policy. So the LLC makes those premium payments. So the LLC is paying for it. So it’s a tax deduction paying for each year, paying the premium on life insurance.

Ashley Kehr:
Okay, so what happens when you own a business together, I’m 50% owner, Joe is 50% owner, but if I pass away, my will pretty much states that my husband and my kids get everything. So that would mean my husband is now 50% owner and Joe’s partner. My husband has no interest in running a real estate business at all. And Joe, you probably wouldn’t care, but they don’t have any interest in being partners together. They’re both the same person, that nobody would be doing the bookkeeping. Nobody would know-

Joe Krieger:
We both have the same strengths and weakness that wouldn’t collide well in a partnership [crosstalk 00:34:05].

Ashley Kehr:
That wouldn’t work. So if I were to pass away, he gets the $100,000 and he uses that to give to my husband and Joe takes my ownership [crosstalk 00:34:17]. Selling my percentage to Joe.

Sarah Robinson:
Okay.

Joe Krieger:
Your life insurance is very inexpensive.

Ashley Kehr:
Very cheap, yeah.

Sarah Robinson:
And we have that babe?

Tony Robinson:
On each other, not on Omid.

Sarah Robinson:
Oh got it.

Tony Robinson:
Properties in an LLC and just in their personal name, do they get an umbrella policy?

Ashley Kehr:
Yeah, so that’s actually something you could do with your partner too. If you do put it in both your personal names and my husband and I have done this for properties that are in my personal name, is get an umbrella policy which provides you that extra liability protection.

Tony Robinson:
We don’t have an umbrella policy yet either. But we are working on that.

Ashley Kehr:
We need to do a show on insurance. I might be embarrassed to say that I’m licensed because I don’t grow a policy in two years. I keep my license up to date to get all those commissions. But I really only wrote policies for six months, I did my own and then other investors, I did his policies but now that they’re all written with that company, I just collect the renewal. So, thanks for my commission check.

Joe Krieger:
Do we split it 50/50 or?

Ashley Kehr:
Okay. So are there any things you guys want to talk about? Like what structuring of your premiership? Is there anything that you guys think you do that’s unique or different or just a really great piece of advice, a tip you can give?

Tony Robinson:
I think the biggest piece of advice is to trust your partners, is to allow them to really play to their strengths. If you partner with someone because they’re better than something, or better at something than you are, then allow them to do the thing that they’re better than you at, don’t get in the way of them. She’s really great at dealing with the guests, and the majority of the time I kind of say out of the way. It’s very rare that I jump in and tell her “No, we should say this. No, we shouldn’t say that.”

Ashley Kehr:
Great advice. Tony Robinson.

Tony Robinson:
Anything to add, wife?

Sarah Robinson:
What was the question again, Ashley?

Ashley Kehr:
What advice or tips… Actually, specifically, I’ll ask you about structuring the partnership. Okay. So, Tony and Omid already had their partnership together when you were brought in, what was that like? Did you guys negotiate what your responsibilities are? What your percentage in the company is? Or how did that that work? Or you were just told? And would you do it differently going forward?

Sarah Robinson:
Good question. We never talked about the percentage. That was never brought up. What is it?

Tony Robinson:
Your percentage is my percentage.

Sarah Robinson:
I’m a whole different person.

Tony Robinson:
Look what you started, Ashley. [inaudible 00:36:58]. Omid and I are 50/50. And our 50 is me and you-

Sarah Robinson:
We’re one, yeah. But no, I’m I’m on board with that. Omid brings so much value to our partnership. So wouldn’t change that. But no, I think they did a great job of just kind of seeing in me what I could bring to the team. And they both know me as my husband and cousin. So I think they scouted the perfect person to add to their team and-

Ashley Kehr:
And Joe. What about you? I feel like me and Tony are kind of in the same boat, maybe you and Sarah, because I was just said, “This is what we’re doing.”

Joe Krieger:
I go with your flow for the most part. And it’s worked out. Yeah.

Sarah Robinson:
Same.

Ashley Kehr:
Yeah, I think you really have to look at your partner’s personality too. I’m very confident in what I know about very little things. But we’re analyzing a deal or specifically putting together seller financing, even this morning we put together two offers that were seller financing. I was basically saying, “Let’s do this.” And he would say, “Well, what if we change that,” but I mean okay, good to go. There’s no hesitation, I guess. You’re really trusting each other. But what tips can you guys give on structuring a partnership and negotiation? So, what are some of the things, if there wasn’t your wife. What are some things you could have negotiated the terms? And Tony, maybe you want to take the lead on this?

Tony Robinson:
I’ve only really had one other partner. And it was such a natural, kind of fluid conversation, that I think if you’re entering into a partnership with someone where there’s a lot of nitpicking over what the rules and responsibilities are, and what the percentages are, then maybe it’s not the right partner for you.

Sarah Robinson:
Those are red flags.

Tony Robinson:
Right. For us, it’s almost the opposite. We’re Sarah, I and our third partner, Omid, we’re also giving that we want to make it as fair as easy as possible. We’re like, “No, no, it’s okay, we’ll do… No, no, no, it’s okay, we’ll do that.” And that’s what makes our partnership really thrive. So I think if you’re ever entering into a partnership where you feel like everything has to be by the book. It’s always good to have that documentation there, but if you have to literally run your partnership by that agreement, then maybe it’s not the right partner for you.

Sarah Robinson:
And one thing is to test the waters, just do one deal together and see how that goes. You don’t have to automatically, “Okay, we’re buying rental properties. Let’s buy a 10 unit and let’s open a property management company. And let’s open up a hard money company. Let’s do all these things at once.” Test the waters. We did one property and then it was probably maybe six months later, we bought the next property and slowly scaled from there.

Joe Krieger:
Things will probably tend to crumble underneath you if you’ll do your due diligence or have patience with a partner.

Tony Robinson:
It was similar for us. We bought our first deal with Omid as a partner. And then I think it wasn’t until we had our fourth property together that we set up our LLC.

Ashley Kehr:
Yeah, and for my partners. And just like Joe, you’re partners with your dad but, there are him, Joe and then my other partner I’ve known since I was two and then my brother and my sister. So, I’ve only done it with people that I’ve known and we only knew each other maybe… Really knew each other for a year before we partnered on the first deal but we just kind of clicked in that whole thing alignment thing. [crosstalk 00:40:22]

Joe Krieger:
We talked about it a lot for a year, so beforehand.

Ashley Kehr:
And the fact that we trusted each other and we’re so open about our finances with each other and what our other properties were going on. It drives me. So we each have properties on our own and sometimes I’ll see something where he has something going on in his property and I’ll be like, “Oh my God, just let me handle it for you.” And they’re like [crosstalk 00:40:44].

Ashley Kehr:
There’s one time I spent a day writing all of these rent increase letters and putting together new lease agreements for, I think it was your fourplex that you owned, yeah. And so I made it all night, literally all he had to do was hand it to the tenants. Everything was done and compared rental rates in the area to show that they were still getting a good market rent and well, they sat on his desk [inaudible 00:41:12], “Okay, he doesn’t want to increase his rents right now.” So, if that was our property, I would have been the one to deliver the lease to them and everything like that but…

Joe Krieger:
It’s nice too to have, how do we put that, a good guy, bad guy, type scenario, where I could blame things on Ashley or she can blame them on me, or having any kind of third party, like your cousin Omid to, “Oh yeah,” our [crosstalk 00:41:39]. He’s not going to approve. They can’t get directly mad at you, so it’s a nice buffer to have.

Ashley Kehr:
Yeah, so before we had a property management company, it was like Joe was never an owner. He was always just the maintenance guy and he would find out so much information but people would call me screaming as a property manager and he would go there and they’d be like, “Oh sweetie, here’s some milk and cookies while you’re waiting.” So yeah, that’s a really good point, Joe too. It’s like you can have someone be that different person like, “Oh, they said no,” and…

Tony Robinson:
I guess one of the last things I want to ask you guys is what about the actual decision making process, what happens if Ashley you want to go one way, Joe you want to go another way, how do you guys manage those situations?

Ashley Kehr:
I think really-

Joe Krieger:
She manages those situations. I’m pretty much [crosstalk 00:42:33].

Ashley Kehr:
There really hasn’t been that many times where we haven’t agreed on something. Even for the design of the house and the colors and tiling, we’re pretty easy agreeing.

Joe Krieger:
Very easy going.

Ashley Kehr:
I guess really the only thing that did cause a ruffle in our partnership was when you bought properties with [inaudible 00:42:56]. And to be fair, it’s with his wife and they bought a business-

Joe Krieger:
Our office for a different business was currently being ran up. So, it made sense in that respect.

Ashley Kehr:
But that’s really the only thing like that.

Tony Robinson:
And I think for us, that we don’t really have that issue either. But it’s mostly because we trust each other to make those decisions, right? Like I mentioned earlier about staying in your lane, I don’t really tell her how to design the properties, right? But she doesn’t tell me how to go out and find the properties or underwrite them, right? So I think having those duties and responsibilities helps relieve some of that potential friction.

Ashley Kehr:
And being able to forgive to. There’s been plenty of times either one of us forgot to do something or mess something up. We were just joking with you guys last night how, when I would learn to do vinyl plank flooring, my cutting was always [inaudible 00:43:51].

Joe Krieger:
Very crushing, but I mean, we got through it.

Sarah Robinson:
Wait, I have a question for you guys, as a rookie myself. We all know each other. I mean, I’m Tony’s wife, you guys knew each other from family friends, but for the listeners who don’t have a relationship with someone who has a like-minded goal, an interest, where can people meet potential partners?

Joe Krieger:
This is a good platform to start with BiggerPockets people in your area and if you find like-minded people say, “Hey, you want to meet up, go to lunch, talk about it and-

Ashley Kehr:
And you will be surprised too, the people that you do know who actually would be interested in it. Joe, probably until a year ago, nobody even knew he had rental properties. You didn’t even talk about it really to anybody.Unless you saw me as a property manager. So you knew that I was interested but…

Joe Krieger:
I’ve always liked to fly under the radar. I never liked people knowing what I owned or to look at me differently and then the aspect of money or whatever it might be. But as time went on, I actually would say, well, the more people you tell, the better off you are. So if my best friend, say I never told him I had rentals and he knew someone who was selling tenplex and I would be interested in something like that, but there was no connection ever made to where he would have said, “Hey Joe, you’re interested in real estate. I have this friend selling this property, you guys should meet up.”

Ashley Kehr:
Yeah, and just tell everybody that you’re interested in… Brandon Turner actually gave me some great advice because I don’t like confrontation and he doesn’t like confrontations. If you’re at a family gathering or you’re anywhere, just go up to someone and be like, “Hey, I’m really getting interested in real estate investing. I was wondering if you knew anyone who was interested in being a partner in a deal.” So you’re not putting the pressure on them at all. You’re just asking if they know anyone that… I think that’s an interesting way to phrase it, because you’re not directly asking them, but you’re also letting them know you want a partner in real estate.

Tony Robinson:
And I think to your point Ashley about being vocal about what you’re doing is so key. You never know who in your circle is already thinking about real estate investing. For her cousin, this is her cousin, her blood cousin, she knew him, grew up with him but she didn’t know that he was interested in investing in real estate. I told her.

Sarah Robinson:
Yeah, I was like, “You guys are partners?”

Tony Robinson:
But I found out because, it’s funny enough, I was on Instagram, David green had posted something, I was on his profile. And I saw that her cousin also followed him. And I sent him a message like, “Oh, you know whatever.” And that small kind of interaction led to us now being partners in all these short-term rentals together. So yeah, find someone, talk it up.

Sarah Robinson:
I think some people, like for rookies, you’re shy to post about it because you don’t have any experience, you don’t really have the capital. So, from what I hear from what you guys are saying is you encourage people that even if you don’t have a single property in your portfolio, don’t be shy to post it on LinkedIn or tell your friends and family. That’s how you can get started, right?

Tony Robinson:
Post a story of the book that you’re reading, right? If you just finished a BiggerPockets books, say, “Hey, I just read this book. Here’s what I learned. I loved it.” Or, “Hey, I’m going on and I’m looking at this property,” or, “Hey, I just signed up for this conference.” Just talk about the real estate things you’re doing and people will eventually start reaching out to you.

Sarah Robinson:
I know meetups, you were big on meetup.

Tony Robinson:
Absolutely. Whenever those start happening again, make sure that you’re there.

Sarah Robinson:
Even virtual meetups that’s going on right now.

Ashley Kehr:
So to kind of wrap it up, let’s each go around and we’ll give one piece of advice to rookie investors for forming a partnership. And, Sarah, we’ll start with you. Ladies first.

Sarah Robinson:
Oh my gosh. Well, I guess my question was so good, I’m going to use the advice you gave. I really encourage the listeners, don’t be shy. I think when you start on a new venture that you’re not too confident about…you’re really shy to post about it or talk about it. So listen to the celebs in the house, Ashley and Tony, take their advice. And don’t be afraid to talk about it. Because, you never know who your partner can be.

Tony Robinson:
I think my advice would be, because again, we get this question a lot is, “I want to partner with my spouse. How do I get my spouse on board?” My advice is, find a way to give them a role in your business that they would enjoy. Maybe they really like doing the books, maybe they like analyzing the properties, maybe you’re a flipper and they want to do the staging, but there’s so many different ways you can get them involved. But it’s up to you as the person to find out what that role should be.

Ashley Kehr:
And I just want to add to that, because I talked to a rookie investor recently struggling with… He really wanted his wife to be a part of it. But also don’t force them, be okay too if they have no interest in it. My husband didn’t come to a property I don’t think until last year or whatever. And Joe’s wife was involved, but really isn’t that involved anymore. So be okay with that, too. If they don’t want to be a part of it, don’t try and force it. So Joe, what would be your piece of advice?

Joe Krieger:
Oh, I would probably bounce off Sarah a little bit. Just don’t be afraid. If you have a good work ethic, you have to take the leap and say, “I’m going to do this.” And there’s going to be some hurdles along the way. But if you work hard enough at it and you believe in it enough, you’ll succeed.

Ashley Kehr:
And I think for me, for my piece of advice would be that communication is key, that communicating with your partner about what systems you want in place. And even boundaries, I text Joe all the time at 10:00 at night, and he texts me all the time at 3:00 AM. He knows I’m probably not going to respond and I know that after 8:00 he doesn’t respond, but I’ll still send messages or whatever. But we have those boundaries in place. He’s with his family and I’m getting my people, not at 3:00 AM, but in the morning, I’m getting my kids ready for school and usually don’t connect with him until after that.

Ashley Kehr:
But also in the decision making, communicate about it. If you know for sure your partner might not be okay with something, don’t go ahead and make the decision. Spend that little bit of time talking about it and just letting them know that they’re a part of that decision can I think resolve a lot of issues down the road.

Tony Robinson:
Awesome. I love this discussion. Wifey, thank you for coming on. Joe, thanks for coming on. It’s like you guys provided a ton of value.

Sarah Robinson:
Thanks, we’re the real stars, right Joe?

Ashley Kehr:
So, Joe and Sarah, where can people find out more information about you?

Sarah Robinson:
Oh my gosh, what do I say? My Instagram?

Tony Robinson:
Instagram’s a good place.

Sarah Robinson:
Okay. My personal Instagram is @saraaraad, it’s S-A-R-A-A-R-A-A-D, and on our YouTube channel, the Real Estate Robinsons.

Ashley Kehr:
You’ll be launched. And Joe? Doesn’t [crosstalk 00:50:45].

Joe Krieger:
I’m happy to say that I do not have any social media. [crosstalk 00:50:49].

Tony Robinson:
You can find Joe on the yellow pages. [crosstalk 00:50:55].

Ashley Kehr:
If you’re in the West Pacific area, you’ll find him in a tree stand, [inaudible 00:51:02]. This story here is so funny. When we’re writing deals, he’s at his phone and I’m like… I’d look over and he’s pulling up his hunting cams for the trail like, “Oh look, there was a fox there.”

Ashley Kehr:
So yeah. Thank you guys so much for coming on. We really appreciate you guys doing this. And you guys, we are live from the BiggerPockets headquarters. So we’re so excited to be here. We got a couple more fun things to do today. But make sure you guys join the Facebook group, the Real Estate Rookie. Tony, how many people do we have in there?

Tony Robinson:
We were almost 24,000 people in that group which is insane, because when I joined the podcast, I think we were 19,000. So we’ve grown so much.

Ashley Kehr:
So, thank you guys so much for listening. Don’t forget to listen to the Rookie Reply on Saturday. I am Ashley, @wealthfromrentals and he’s Tony Robinson, @tonyjrobinson. Thank you guys for listening.