Looking for sage advice/tips on how to approach RE investments with a partner

New to Real Estate · Kingston, NY · Member since 2022 · 5 posts · 7 votes

A friend and I are looking to dive into a real estate investment together 50/50. Thing is, we're both fairly new to this.

The gist:
I am already a homeowner. She isn't.
I have great credit. Hers is excellent.

We're looking in upstate New York as that is where we both currently live, but we're still thinking about what kind of investment we want to make, i.e. multi vs single family home, rent vs flip, long term vs short term rental, etc. Is there any one investment that would make most sense for us first-timers?

Also, she recently heard about a $200k renovation loan we could potentially get. Any NY investors aware of this?

Appreciate any and all insight and input you can give me!

Anna

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Kunal DattPro Member

Raleigh, NC · Member since 2020 · 30 posts · 25 votes

Cash flow can be difficult to come by even in Raleigh and properties are not staying on market long (even the ones that need extensive rehabs). I am a local investor in this market so let me know if you want some insight.

Not saying it won't cashflow at all, just don't expect 8-12% CoC returns.

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Dominic Pizzi
Lender · Freehold, NJ · Member since 2022 · 236 posts · 85 votes
3y
Hi Anna!
I think as first timers, you need to have a plan. Many people who are first timers just jump right in and think about the consequences later. You got to think of what strategy you want to go with: rent ready properties or Brrrr properties, SFR or multi, LTR or STR.
This can be different for everyone. I have heard investing in update NY can be somewhat difficult with high property taxes that kill your cash flow. You both might want to look in an area where there is upcoming growth, places such as Detroit or Cleveland where you could get more bang for your buck.
Although I am not an investor yet, the best advice I can give you is to form a good team: a realtor, lender, property manager, and contractor. These 4 will be key to overall success in investment real estate no matter what market you choose and what type of property you look at acquiring.
Best of luck to you both!
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River SavaPro Member
Lender · USA · Member since 2022 · 1k+ posts · 1k+ votes
3y
Hey Anna!
STR and MTR markets are hot right now. As mentioned, NY has high property taxes so I would suggest investing in areas on the rise like Raleigh or Charlotte. Location is everything so it does not hurt to do your research there.
That being said, have you looked into DSCR loans? Here is an article that breaks them down and I would be happy to help/answer any further questions you have!
https://www.biggerpockets.com/...
[email protected]
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Kunal DattPro Member
Raleigh, NC · Member since 2020 · 30 posts · 25 votes
3y
Cash flow can be difficult to come by even in Raleigh and properties are not staying on market long (even the ones that need extensive rehabs). I am a local investor in this market so let me know if you want some insight.
Not saying it won't cashflow at all, just don't expect 8-12% CoC returns.
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
3y
@Anna M. Xiques
When partnering with anyone, but especially family & friends, you want everything in writing. Otherwise, you may not be welcome at future family events!

Too many investors want to partner with “handshake agreements”, which they would never do with a tenant or property management company.

Things to think about:

1) What happens if one of you is suddenly incapacitated or dies? Do the surviving partners get that investor’s shares or do they have to deal with relatives that may be ignorant and/or greedy?

2) What happens if one of the partners wants to terminate the business relationship and wants their investment out now?

3) What happens if one of you drinks & drives, killing someone and getting sued by the victim's family? How would the other partner(s) be protected from that?

So, why wouldn't you want to hire an attorney to create a partnership agreement and perhaps an LLC to cover as much of the above as possible?

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Mackenzie Grate
Interior Decorator · Ulster County, NY · Member since 2020 · 204 posts · 177 votes
3y
Hi Anna,
I personally invest in upstate NY and I have partnered with someone on one of my deals. While it's gone fairly okay, there still have been some hiccups that I will make sure I address next time before I jump into another partnership.
Here are some things to think about:
- Decide your strategy first. This is going to be based on your goals. Are you in it for cash flow? Or more of an appreciation play? Are you comfortable holding it for awhile, even if that means you might have to pay a little out of pocket along the way while you are stabilizing it? Or do you want to do a project more like a flip where you can get in and get out and test how your partnership works before you commit to a long term relationship?
-Once you have that, develop your operating agreement. And use a lawyer. They will ask you a ton of questions you probably won't even think about when you two are coming up with the initial agreement yourself. Why? Because it's your first deal and you don't know what you don't know. What will happen if one person wants out? What will happen if one partner dies? What will happen if your tenants aren't paying rent and you have to carry the property for a bit? Who is managing the property or project of fixing it up? Who is managing the bookkeeping an taxes? Etc. Etc. Etc.
-Lastly see if you guys are a match in stressful situations. This may sound silly, but travel together. You get a real sense of how someone handles stress when something goes wrong on a trip or when someone is put into an entirely new situation outside their comfort zone. Both of those things will inevitably happen while investing. Are you a match and are you compatible when it comes handling challenges thrown your way. If not, I'd strongly reconsider partnering with this person.
If the reason you are thinking about partnering is just because you feel like you need the money now, to get started today, pause. Go back and really consider whether this person will add stress to your life or remove it when things get hard. Cause the first one is ALWAYS hard. Remember, you can do it on your own. It may take longer, but sometimes its better to partner with no one and take the slower and steadier road than introduce someone just so you can get there quicker. Just food for thought.
Either way, good luck! I know if you stay the path and are committed, you will be wildly successful. You got this! :)

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