Cash Poor But Time Rich

7 Replies

Although I've been on the periphery for a while, I'm just beginning to dive head forward into real estate. Last month I found an amazing deal on two duplexes, but because I don't have any  money to put down, no one is looking to partner with me. How do I better market myself as an asset and not a liability or a leech? 

In that case, perhaps take less than 50% and agree to handle all of the property management duties?

Ayana congrats on getting started. As youre starting out, figure out what type of value you can bring to the transaction if money is not one of them. Can you manage the project, are you a real estate agent who can get it sold, can you find the end buyer? Figure out what your value is, and bring that to the table. You may not be able to get 50/50 but you will learn a ton and develop credibility as an investor. 

Another thing to consider when starting out is to wholesale the deal to another investor. If its a great deal and it turns out well for them you could build the relationship with them so that you can partner on the next deal in the future. 

@Ayana Sabree I think it might help to define the type of partnership you're looking for as well as your goal with the two duplexes.  If it's a buy-and-hold scenario then it might be harder to get behind the idea of losing 50% of the cash-flow (i.e. paying it to a partner) while having 100% of the risk in the deal.  It it's a rehab then flip at a higher price then at least there's a near-term exit (my capital isn't tied up for __ years) and it's a little easier to "split the profit".  The other challenge is that there has to be A LOT of meat on the bone if you're going to split it two ways.  Basically, if your deal cash-flows $200 per unit and I (as the person with the money) can find a deal that cash-flows $100 per unit on my own there's no real reason for me to do the deal.  You've taken the upside away.  It's not that you didn't work hard to find the deal, don't deserve to be rewarded economically for finding the deal, but it's helpful to keep in mind that "the folks with the money" have to find a deal that's "over twice as good" as they can find on their own if they're going to take on a no-money 50/50 partner.  Now if as @Brian Schmelzlen suggests you can operate as the property manager that's helpful but likely not to move mountains.

If your deal is great, why not go to a HML? There was just a podcast with a HML that only lends in Texas. The terms aren't great (which he shouts from the rooftop) but if the deal is uniquely special then there are worse things in the world than "a great deal with mediocre debt terms".

Originally posted by @Brian Schmelzlen :

In that case, perhaps take less than 50% and agree to handle all of the property management duties?

 That's definitely my intent. 30 or 40 percent of the profit is better than none at all. 

Originally posted by @Garrett Hogan :

Ayana congrats on getting started. As youre starting out, figure out what type of value you can bring to the transaction if money is not one of them. Can you manage the project, are you a real estate agent who can get it sold, can you find the end buyer? Figure out what your value is, and bring that to the table. You may not be able to get 50/50 but you will learn a ton and develop credibility as an investor. 

Another thing to consider when starting out is to wholesale the deal to another investor. If its a great deal and it turns out well for them you could build the relationship with them so that you can partner on the next deal in the future. 

 Thanks Garrett! I am in the process of getting my real estate license, but as a partner, I'd be able and willing to manage the project completely and be a property manager if need be. 

With the duplexes I wanted to wholesale, but my problem was getting proof of funds letter. My real estate agent stated that she couldn't put the property under contract without one. 

Originally posted by @Andrew Johnson :

@Ayana Sabree I think it might help to define the type of partnership you're looking for as well as your goal with the two duplexes.  If it's a buy-and-hold scenario then it might be harder to get behind the idea of losing 50% of the cash-flow (i.e. paying it to a partner) while having 100% of the risk in the deal.  It it's a rehab then flip at a higher price then at least there's a near-term exit (my capital isn't tied up for __ years) and it's a little easier to "split the profit".  The other challenge is that there has to be A LOT of meat on the bone if you're going to split it two ways.  Basically, if your deal cash-flows $200 per unit and I (as the person with the money) can find a deal that cash-flows $100 per unit on my own there's no real reason for me to do the deal.  You've taken the upside away.  It's not that you didn't work hard to find the deal, don't deserve to be rewarded economically for finding the deal, but it's helpful to keep in mind that "the folks with the money" have to find a deal that's "over twice as good" as they can find on their own if they're going to take on a no-money 50/50 partner.  Now if as @Brian Schmelzlen suggests you can operate as the property manager that's helpful but likely not to move mountains.

If your deal is great, why not go to a HML? There was just a podcast with a HML that only lends in Texas. The terms aren't great (which he shouts from the rooftop) but if the deal is uniquely special then there are worse things in the world than "a great deal with mediocre debt terms".

I can definitely understand where you're coming from. The deal needs to be a win-win for all parties involved. I'll definitely take having more "meat on the bone" into consideration in the future. This deal was two duplexes for potentially $400k. My main hang up was that POF letter, which I'm still trying to figure out how to procure.

And I've spoken with HMLs, but because I don't have ANY skin in the game, they aren't willing to take the risk which is understandable. 

Originally posted by @Ayana Sabree :
Originally posted by @Garrett Hogan:

Ayana congrats on getting started. As youre starting out, figure out what type of value you can bring to the transaction if money is not one of them. Can you manage the project, are you a real estate agent who can get it sold, can you find the end buyer? Figure out what your value is, and bring that to the table. You may not be able to get 50/50 but you will learn a ton and develop credibility as an investor. 

Another thing to consider when starting out is to wholesale the deal to another investor. If its a great deal and it turns out well for them you could build the relationship with them so that you can partner on the next deal in the future. 

 Thanks Garrett! I am in the process of getting my real estate license, but as a partner, I'd be able and willing to manage the project completely and be a property manager if need be. 

With the duplexes I wanted to wholesale, but my problem was getting proof of funds letter. My real estate agent stated that she couldn't put the property under contract without one. 

Ayana, if you do a search on here for proof of funds letters, there are a number of different resources and companies available for obtaining one. Id also suggest talking to some local hard money lenders in your area. They would be able to provide you with POF as well.

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