To business or not to business, that is the question...
hello all well educated, informed, savvy, handsome/beautiful BP peoples!
I am considering working with one of my best friends in real estate investing. Over the past year I have done my homework to understand what I can so far about the field. I have also possibly targeted an entry level market I would like to get into. However, after just buying a house for my family and rehabbing it myself, I lack the capital currently. Enter best friend. My friend has had his house for some time now, and he hasn't quite bought into the idea of investing yet but he is very interested. He can procure a sizable HELOC on his current property that we could leverage to get started. Now, he likes the idea of benefiting from monthly cash flow. I like the BRRRR strategy. But how do you go about splitting the cash flow of a property between two people? do you want to do that?
One thought I considered is having a small corporation business for my friend and I, which would receive the cash flow and we could allocate payment funds accordingly. This consideration however lead me down a rabbit hole I an not very familiar with. I do plan on doing my research, and one stop to doing it is asking you wonderful people.
Hence the question! do I pursue a small corporation business for my friend and I or do I not. for those of you who do invest this way maybe you can fill me in on the pros and cons.
thank you all for reading and connecting
Nate
Find a deal and work it @Nathan Fraser. Your partner has access to funds, but they will be tied to his current property so go carefully, he is taking a risk. Suppose you found a property, my partner found a hoarder house for $20,000. Then you rehabbed the property - ours took about $120,000 to turn a duplex into a single family home. Can you swing the hammer, paint, plaster or something of value? You and the money partner must express this help in a percentage or maybe a dollar figure. Then the property is sold, the Heloc is paid in full and the partners get their percentages, if all goes well. A good book for showing how this is done, better that this short paragraph, would be any of Garrett Sutton's books about running LLC's or limited partnerships. There is a way to layout the division of capital and member's roles, in the company's operating agreement. If he wants cash flow, his portion of the profit might be returned to him over time.
Practice the math with some deals in your area and see if the Heloc is rich enough to make it work, before you go buying things or starting the company.
Kathy
thank you for your suggestions! I have added many of Garrett's books to my audible account for future listening due to your recommendation, so thank you for that.
