Tips for Maximizing Capital with LLC Partnership
Hello,
I am creating an LLC with a business partner to buy Real Estate properties. We are looking at multi-family properties in Colorado Springs and Pueblo. We currently have around $100,000 in personal capital total.
A little background about my business partner and me. We served together in the Marine Corps. He currently lives in Denver and owns a property. I currently am living in Japan with my wife who is in the Navy. We will be here for two more years. My wife and I own a rental property in San Diego. The LLC's goal is to own multiple properties and eventually open a restaurant once I am back in the States.
I am curious to see if anyone has any tips on how to maximize our capital. Ideally, we would like to buy multiple properties, but with a 20-25% down payment, this eats up most of that capital. We plan on BRRRRing to get our money out and purchase more properties but that may take some time.
Thank you very much for reading and for any input!
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Quote from @Darien Stinson:
Hello,
I am creating an LLC with a business partner to buy Real Estate properties. We are looking at multi-family properties in Colorado Springs and Pueblo. We currently have around $100,000 in personal capital total.
A little background about my business partner and me. We served together in the Marine Corps. He currently lives in Denver and owns a property. I currently am living in Japan with my wife who is in the Navy. We will be here for two more years. My wife and I own a rental property in San Diego. The LLC's goal is to own multiple properties and eventually open a restaurant once I am back in the States.
I am curious to see if anyone has any tips on how to maximize our capital. Ideally, we would like to buy multiple properties, but with a 20-25% down payment, this eats up most of that capital. We plan on BRRRRing to get our money out and purchase more properties but that may take some time.Thank you very much for reading and for any input!
My first couple thoughts are no and aw hell no.
If one of you had a lot of experience and was local I might feel differently.
If deals were a plenty and we were at the beginning of an expanding market cycle, I might feel differently.
I get the brotherhood and am also a Marine. Just can't give a rah to this proposition.
Adapt and overcome by investing in something liquid you know well and can control better while overseas. I-bonds, index funds while low, etc.
Hi Darien,
I think the BRRR method is the way to go! A good way to max your capital is to have your partner in Denver purchase a primary and rent out rooms and or units and then do a 20-25% down payment for the other property. This way you get 2 properties going.
You could also look to do a 10% down second home property. This would be more for a buy and hold strategy and use the other $50k for another strategy.
Having only $100k I think the best route is BRRR as of now unless you have a way to get more capital for rehab costs.
Hard Money and Private Money could also help get the first deal moving.
What draws you to the Colorado Springs Market?
Quote from @Tanner Pile:
Hi Darien,
I think the BRRR method is the way to go! A good way to max your capital is to have your partner in Denver purchase a primary and rent out rooms and or units and then do a 20-25% down payment for the other property. This way you get 2 properties going.
You could also look to do a 10% down second home property. This would be more for a buy and hold strategy and use the other $50k for another strategy.
Having only $100k I think the best route is BRRR as of now unless you have a way to get more capital for rehab costs.
Hard Money and Private Money could also help get the first deal moving.
What draws you to the Colorado Springs Market?
Hi Tanner,
Thank you for reaching out! Ideally, we would love to put as little money down but from what I have read, most companies want LLCs to provide at least 20% down. In your experience, have you seen this to be true?
We are drawn to the area for a few reasons. It is close to home for us, it is a beautiful city, and I believe having a large military presence is always a good thing in a market. However, we might stick with Pueblo for our first few deals because it is more within our budget.
Quote from @Darien Stinson:
Quote from @Tanner Pile:
Hi Darien,
I think the BRRR method is the way to go! A good way to max your capital is to have your partner in Denver purchase a primary and rent out rooms and or units and then do a 20-25% down payment for the other property. This way you get 2 properties going.
You could also look to do a 10% down second home property. This would be more for a buy and hold strategy and use the other $50k for another strategy.
Having only $100k I think the best route is BRRR as of now unless you have a way to get more capital for rehab costs.
Hard Money and Private Money could also help get the first deal moving.
What draws you to the Colorado Springs Market?
Hi Tanner,
Thank you for reaching out! Ideally, we would love to put as little money down but from what I have read, most companies want LLCs to provide at least 20% down. In your experience, have you seen this to be true?
We are drawn to the area for a few reasons. It is close to home for us, it is a beautiful city, and I believe having a large military presence is always a good thing in a market. However, we might stick with Pueblo for our first few deals because it is more within our budget.
Yes, if you purchase through an LLC they will require that. You could buy in your personal name and then after closing transfer it to the LLC.
I went to school in Pueblo for four years and know the market pretty well. I do deals there from time to time but I do not like it for a market to invest in. There are a few areas around the college campus (CSUP), North Pueblo, and Pueblo West That are the better areas if you do decide to take that route. Pueblo West is almost another small city with in Pueblo and is newer builds and larger lots near the Pueblo Reservoir.
@Darien Stinson It's going to be tough to find a deal with only $100k and needing to put down 20%-25%. That would mean you're looking for a multifamily property for between $400k-$500k or less since at this purchase price it is likely that you would need additional capital for renovations. Is the intent behind purchasing with an LLC to build business capital that would be used to fund the restaurant?
Ultimately, if you're looking to grow your capital as efficiently as possible then you should consider purchasing using conventional financing. Some lenders will allow you to purchase investment properties for as little as 10% down. This can't be done through an LLC, but you can still organize partnerships with others and lending terms will be much more favorable. You can always put it under an LLC in the future if needed.
The trick in part is financing types when you buy, if you brrrr, some HML will offer better LTC then others.. I prefer 100%. Another option is now, while your credit is likely strong and utilization is low, obtain a ** few** low or no interest trade lines at Lowes, local flooring supply stores, etc. Used with intelligence these can help maximize your leverage and liquidity.
The trick is not to see that $100,000 as being spent, ever, but saved, and recycled.