Purchasing First BRRRR Investment Property with a Partner

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Purchasing First BRRRR Investment Property with a Partner

Nick Kendall
Chesterton, IN · Member since 2017 · 1 post · 1 vote

Hi All,

Really excited to have discovered Bigger Pockets and this awesome community! I am a new/aspiring BRRRR investor and this is my first post to the forums. My wife, Morgan, actually got us started on this financial freedom kick (kudos to her!). She started reading articles and discovered the Mad Fientist podcast. From there we also discovered Afford Anything and the BP podcasts, where we realized that we wanted to go the real estate route, while still investing in low cost index funds on the side. Over the last few months we have listened to/read countless podcasts and articles to gain a better understanding of real estate investing as a whole. We both have full time jobs and a 9 month old baby, that we would love to spend more time with in the future by supplementing our incomes. The BRRRR method seems to fit most in line with our goals. We live in Indiana and commute to DT Chicago for work everyday. We are looking to either purchase a single family or duplex in Indiana to BRRRR. We also plan on partnering with a friend to help with initial investment, cosmetic rehab (we plan to do the work ourselves and are not looking to knock down walls or anything major), splitting property management responsibilities, etc.

I am hoping the community can help me out with some questions that I am still trying to tackle.

1) I am struggling with the financing aspect of acquiring a loan with a partnership. Ideally we would like to form an LLC and finance under the LLC. I talked with my lender and she stated that we cannot acquire a loan through an LLC and it would have to go under our individual names. Any way to get around this or any recommendations on how to invest in properties with a partner, while mitigating risk?

2)  Should I just sit down with a lawyer and have him draft up a partnership agreement (both parties 100% want to have something in writing before we purchase our first investment property), or are there any resources on the site/elsewhere that we can draft our own agreement?  

3)  How should we go about drafting a lease for our tenants?

4)  Any other advice/lessons learned with a partnership would be much appreciated.  What am I missing?!  Haha.

Thanks in advance.

Cheers!

Nick

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Adrien C.
Property Manager · Griffith, IN · Member since 2015 · 1k+ posts · 913 votes
9y

@Nick Kendall Most will agree with @Alex Deacon that partnerships are extremely difficult to maintain over a long period of time. You both have to be on the same page when you start; have the same long term goals; and set up your divorce before you even get started. 

As far as money, most banks will not lend to an LLC unless it's a commercial loan. To get a commercial loan, you need to be in good standing and show income for 2 years.

I would meet with a good CPA or attorney to draft up your business documents. I would suggest the CPA (and I can recommend a good one locally if you need one) because how you set up the entity has a huge baring on how you're taxed. Likewise, I would get a lease from an attorney. A good lease will save you a ton of money if you ever have to enforce it. Again, I can give you the guy I use for leases. Once you have it, you can use it over and over again. 

Finally, attend some of the local investor meetups. There's a really good one in Highland and an OK one in Merrillville. 

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  • Alex Deacon
    Investor · Pittsburgh, PA · Member since 2015 · 1k+ posts · 1k+ votes
    9y

    @Nick Kendall take it slow. Educate yourself. Surround yourself with people smarter than you and who are successful at what you want to do. I dont like partnerships until you become more a more seasoned investor. Its an art form in picking out the right partners. most of them fail. Sorry but this is what you need to hear. it sounds like you need more experts in your corner. Build your team. 

    1Reply
  • Adrien C.
    Property Manager · Griffith, IN · Member since 2015 · 1k+ posts · 913 votes
    9y

    @Nick Kendall Most will agree with @Alex Deacon that partnerships are extremely difficult to maintain over a long period of time. You both have to be on the same page when you start; have the same long term goals; and set up your divorce before you even get started. 

    As far as money, most banks will not lend to an LLC unless it's a commercial loan. To get a commercial loan, you need to be in good standing and show income for 2 years.

    I would meet with a good CPA or attorney to draft up your business documents. I would suggest the CPA (and I can recommend a good one locally if you need one) because how you set up the entity has a huge baring on how you're taxed. Likewise, I would get a lease from an attorney. A good lease will save you a ton of money if you ever have to enforce it. Again, I can give you the guy I use for leases. Once you have it, you can use it over and over again. 

    Finally, attend some of the local investor meetups. There's a really good one in Highland and an OK one in Merrillville. 

    2Reply
  • George A.
    Investor · Hobart, IN · Member since 2015 · 10 posts · 2 votes
    9y
    Was wondering if you could also give me the number for the attorney I like to get a lease as well.
    0Reply
  • Steve K.
    Denver, CO · Member since 2017 · 265 posts · 234 votes
    9y

    @Nick Kendall , my first thought is that you and your wife would be better off doing a small BRRRR or even house hack (low down payment because you're owner-occupied)....why dilute yourself with a partner and take 1/2 of a small deal? The first deal is likely to be small enough; you'd be growing your wealth faster if you can do the whole deal, and spring forward into 2 or 4 or 8 in the coming years. The exponential growth works twice as fast if you start with 100%, instead of 50%.

    Have you read what @Billie Miller did by living in a duplex (house hack)....I don't believe they needed a partner? (search her posts here on BP, look up her personal website/blog for the success story.

    Or here's three successes I enjoyed reading about...using BRRRR (Two did it solo as couples, One admittedly used a partner).....see if you get additional inspiration from their success of @Joshua D. , @William Collins and @Austin Fruechting did in 5, 2.5 years and 7 years, respectively, buy using BRRRR (Austin was also featured in BP Podcast #239)

    https://www.biggerpockets.com/forums/223/topics/459415-500k-net-worth-in-5-years-im-30-today?page=1

    https://www.biggerpockets.com/forums/48/topics/429980-officially-financially-free-at-32----exciting-day

    https://www.biggerpockets.com/forums/223/topics/445367-full-time-employee-multiple-brrrr-side-hustle-2875-to-goal

    1Reply
  • Greg Carrier
    Investor · Granger, IN · Member since 2015 · 195 posts · 129 votes
    9y

    let me know if you will go as far East as LaPorte.  I have a very good flip candidate house there that we have not gotten to yet.  I have partnered with one other person  (a former work friend) and the house turned out great.  He is in Elkhart though and too far away from this one.  We also do houses in South Bend, Niles Mi and surrounding.  I would be happy to meet with you as well if you want to take a look.  No pressure, I just have more houses than I can get to right now and my last partnership worked out very well.

    Good Luck

    0Reply
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