How can we make rental properties profitable for three partners

Question

My husband and I are just breaking into real estate investing.  We have two family members that we want to partner with, however we are unsure how to establish roles within our group.  We have come to the conclusion that flipping homes is the easiest way for us all to profit.  I wonder though if anyone has any advice on how to get into rental properties and make it fair for all parties involved.  Would love any advice anyone has for us newbies!!!

Eric James · Answer

So many people are jumping into flipping, thinking how easy it looks on TV. Many of these people are losing money. You need to be careful. Remember the saying, you make your money when you buy.

Steve S. · Answer

1) I would advise against going into business with family or friends, when large sums of money are involved somehow people just become irrational and take advantage of pre-existing relationships... but if you insist I would highly recommend that you write up some type of partnership agreement and have each partner have their own lawyer review it.

2) If you want a partnership but have no idea what each person's role is, I have to ask why have a partnership at all? If I am to partner with someone I will already know going into the partnership what value they bring to the table. If I am unclear as to what value they bring there is absolutely no way I'm partnering with them.

I can only assume that the reason you're partnering with others is splitting the upfront capital costs. (this is only an assumption however so if I'm incorrect I apologize) If that's the case then you have to look at all the other "jobs' required in your en devour. Who is going to find the deals? Who is going to do the labour involved with flipping the house? Who is going to get all the permits pulled? Who is going to write up the budget and update the books as the project progresses.

3) You THINK that flipping houses will be your EASIEST way to make profit?!!??! Roll up your sleeves and get ready to put your nose to the grindstone! In my experience I've seen only two other sectors that work harder than those that flip houses. Those that own and run their own restaurants and nurses. And if you're doing this as a side job to supplement your full time job get ready for some 60-80 hour work weeks. When it comes to cheap, fast and well done for a job you will only be able to get 2 out of three. Being very organized will help you with your costs, but personally after organizing the job and timelines I try not to go cheap in my experience you just end up paying double in the long run.

4) My best advice don't go running into this venture blind. There is so much knowledge you can gain cheap or free! Start here at BP. Then check out your local library and see which books/videos can educate you. Then perhaps buy a book or two. Start to build up a "network" of people that you can ask other questions to or go to for services. Financing, real estate agents, trades people, insurance brokers and lawyers are all professions off the top of my head that you will need at your disposal. It shouldn't just be one person either. If I have a plumbing problem that I can't fix, I have in my phone 4 other plumbers I can call, the same goes with almost every other trade. I have used 3 different lawyers, several real estate agents and list goes on.

I wish you all the success and prosperity in your venture... just make sure you measure twice then cut once!

Henri Meli · Answer

@Sarah Ramirez That is really lots of questions.

1. On partnerships: Here is a good link .

2. On advice: I would recommend that all member of your partnership team spend a little bit of time on bigger pockets getting educated and listening to podcasts. This should really help.

3. There are plenty of other resources here that you can digest and learn from. Make sure to leverage them.

4. You can always ask questions on the forum. People will be glad to answer.

Good Luck !!!