Partners

8 Replies

I currently do not have enough established credit for bank financing, I met a local investor willing to do a lease purchase agreement for several of his properties.

While having a conversation with my dentist, he said he was looking to also get into real estate investing and would be open to partnering. He's more establish, he would finance the deals and I would handle the property management. Has anyone had any experience with a partnership as such? Is this the best way to do this? Is an LLC required?

I dont like the sound of you and your dentists potential arrangement.  He would be the sole owner and make the cash flow and you would only make the monthly property management fee.  All that work is not worth it for the little you will make. 

Why not see if you can get your dentist to lend you private money so you can flip a few deals and make most of the profit?  Or get him to lend and you do most the work and split 50/50 and make sure he doesnt charge interest. 

You didnt mention the profit split arangement with your dentist. If he funds the deals, you manage the properties. You split profits 50/50. Seems like a fair deal that could work. 

as @Curt Davis  mentioned, if you only get paid for property management,  that does not seem reasonable.

There are multiple ways to structure the entity, once you have a basic agreement "partnership" responsibilities and profit split agreement. 

A good cpa can help you set up the best legal entity based on what you both want to accomplish with the venture. 

I have connection with several organization that have investment properties that need re development of the properties. I am looking for partners in the New Jersey / New York area to invest in them,. I have 20 years in residential constructions experience. I am willing to do the sweat equity on them. How would I find these partners and begin the process?

Yes definitely do a split. I like using OPM and I have an investor that I do deals with and we split 50/50. He has the money and wants to get a nice return so I find the deals and manage the managers. The investor puts up money and then gets a nice return. Doesn't do a thing other than provide money.

One thing to consider when establishing a partnership in real estate is to discuss how you will disperse profits and agree on the onset on working capital levels. I have been in a partnership deal where the other person, "needed the money more" and we came to head on when and how to take profits and what an appropriate level of working capital and re-investment is appropriate. This eventually ended the partnership but I learned that sometimes you can't assume what the other person is expecting when it comes to profit and growth. I wanted to reinvest in properties and grow wealth!

@Cody Begg Thanks Cody! That is an aspect of partnering that I had not thought about. 

@Brandon Turner  and @Cody Begg, since you both have obviously thought a lot about partnering, I have a question for you: 

If I were to partner with someone on a cash buy of a rental property, and they provided all the up front capital (purchase price and renovation), and I did all the work (finding, managing, etc.), would a 50/50 split of equity and future cash flows be appropriate? 

I ask because Brandon has talked about doing a 50/50 split when the money partner pays only the 20% down payment (and puts the mortgage in his/her name). If the money partner pays 100% instead of 20%, should they get a better deal than a 50/50 split? 

This is not a rhetorical question. Basically what I am asking is, what would a typical split be in this situation (or would it be some other arrangement besides a split)? 

I talking about a situation where the money partner wants to have some equity. I understand that another option is to simply lend the money with a lean on the property.

Thanks!

I currently have 2 rental properties, and they are both going great.  My parents now want to be "silent investors" and fund 50% of the down payment on the next one.  I will be finding the properties, analyzing, screening the tenants, hiring repair workers, etc. 

What do you think is a good partnership deal in terms of each of our returns?  Also, who takes title to the house? 

Can we both be on the loan, and setup a bank account that is separate and with both of our names on it? 

Is their any additional paperwork that I would need to fill out, such as joint venture paperwork?

Thanks!



Originally posted by @Curt Davis :

I dont like the sound of you and your dentists potential arrangement.  He would be the sole owner and make the cash flow and you would only make the monthly property management fee.  All that work is not worth it for the little you will make. 

Why not see if you can get your dentist to lend you private money so you can flip a few deals and make most of the profit?  Or get him to lend and you do most the work and split 50/50 and make sure he doesnt charge interest. 

@curt davis: Comment/question on "make sure he doesnt charge interest" I think what Curt is saying and correct me if I have it wrong is that the investor is working with ALL Cash so make sure he is not charging you interest. BUT if the investor is not working with ALL cash and getting any type of financing will he be charging you this interest?

Seems to me if you have a money investor you would want them to be working with ALL cash and not charging you any interest...especially if you are splitting the profit 50/50 .... If the investor is just providing money and thats it, seems one would eventually just go to a hard lender or work harder on getting a commercial lending where the banks take practically none of the profit... (minus any point(s) and interest they charge)

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