Investor · Louisville, KY · Member since 2017 · 102 posts · 80 votes
I am partnering with 2 people. Each of us will be investing equally but I feel as though I have more knowledge on how to purchase and manage rentals and have all the forms/processes laid out.
Granted, my experience has been 2 years of running my Airbnb and only 2 months of owning/renting a 4 plex. BUT Ive spent the past 3 years reading all the BP books.
One partner has no rental experience. And the other had a horrible experience 10 years ago..
What is my “experience/knowledge” worth? In addition to that, I also feel as though I am the ring leader, putting together action steps, keeping us moving forward/getting clear on our goals, etc.
Real Estate Consultant · USA · Member since 2014 · 1k+ posts · 751 votes
6y
@Justine Scheuher I don't think the amount of knowledge is as important as what each person will be doing as part of your joint venture. You should layout a Joint Venture agreement that describes what each partner will be doing. If the investment is equal and the work is equal then I think the split should be equal.
Real Estate Consultant · USA · Member since 2014 · 1k+ posts · 751 votes
6y
@Justine Scheuher I don't think the amount of knowledge is as important as what each person will be doing as part of your joint venture. You should layout a Joint Venture agreement that describes what each partner will be doing. If the investment is equal and the work is equal then I think the split should be equal.
@Justine Scheuher I don't think the amount of knowledge is as important as what each person will be doing as part of your joint venture. You should layout a Joint Venture agreement that describes what each partner will be doing. If the investment is equal and the work is equal then I think the split should be equal.
In many cases, the knowledge is worth more than anything else. Many REI go into this without it, or with a minimum, hit an obstacle, and can't get past it. As important as the knowledge is for getting in a deal, it's critical for getting out...and if you're doing this right, the getting in is based on the getting out, because the getting out should be based on the next getting in.
@Justine Scheuher I don't think the amount of knowledge is as important as what each person will be doing as part of your joint venture. You should layout a Joint Venture agreement that describes what each partner will be doing. If the investment is equal and the work is equal then I think the split should be equal.
In many cases, the knowledge is worth more than anything else. Many REI go into this without it, or with a minimum, hit an obstacle, and can't get past it. As important as the knowledge is for getting in a deal, it's critical for getting out...and if you're doing this right, the getting in is based on the getting out, because the getting out should be based on the next getting in.
But it's hard to quantify. Too subjective. What's the monetary difference between 1 year's of experience and 10 years of experience?
Rental Property Investor · Washington, DC · Member since 2015 · 429 posts · 393 votes
6y
@Justine Scheuher
I think you may be asking the wrong question. The question you should be asking (and answering together) is “what value do each of you bring to the business?”
It seems you’ve already answered this for yourself. So then what about your other Partners. What value do they bring? Does one of them have more capital to bring into deals? Does one person have more relationships in the industry? Lender relationships? Better credit? Will one person be more the “boots on the ground” deal finder? Is one of you more tax savvy?
Whatever it is, you all need to decide your strengths and primary value contributions as much as you can up front, determine the percentage value, and go into the partnership with these agreed upon. A partnership is a relationship, and you should set expectations as best you can, or else it can lead to problems later.
@Justine Scheuher I don't think the amount of knowledge is as important as what each person will be doing as part of your joint venture. You should layout a Joint Venture agreement that describes what each partner will be doing. If the investment is equal and the work is equal then I think the split should be equal.
In many cases, the knowledge is worth more than anything else. Many REI go into this without it, or with a minimum, hit an obstacle, and can't get past it. As important as the knowledge is for getting in a deal, it's critical for getting out...and if you're doing this right, the getting in is based on the getting out, because the getting out should be based on the next getting in.
But it's hard to quantify. Too subjective. What's the monetary difference between 1 year's of experience and 10 years of experience?
I agree it's hard to quantify, but it's still extremely important, and in many cases more valuable...and the timeframe of experience/knowledge only makes a difference if the knowledge gained was worth the time spent. Knowledge that is specific to the deal is the most valuable. Much like finding a source for endless leads vs a few quality ones. Piling up useless knowledge over 10 years doesn't make it more valuable than 1 year of quality. That isn't a statement diminishing the value of experience...not at all...it's simply a quantification of the quality. The more knowledge one has specific to locating deals, turning bad deals into good ones (without rationalization), and finding the sources for these deals where there is little if any competition, is worth that pot of gold at the end of a rainbow. It's that quality/specific knowledge that gets Real Estate Investors more opportunities than those REI that are relying on "buy low, sell high" as their main...and sometimes only, M.O.
I think you may be asking the wrong question. The question you should be asking (and answering together) is “what value do each of you bring to the business?”
It seems you’ve already answered this for yourself. So then what about your other Partners. What value do they bring? Does one of them have more capital to bring into deals? Does one person have more relationships in the industry? Lender relationships? Better credit? Will one person be more the “boots on the ground” deal finder? Is one of you more tax savvy?
Whatever it is, you all need to decide your strengths and primary value contributions as much as you can up front, determine the percentage value, and go into the partnership with these agreed upon. A partnership is a relationship, and you should set expectations as best you can, or else it can lead to problems later.
I believe the word is "BINGO". There are only 3 reasons to form a Partnership. Partnerships not following these reasons are doomed to fail...or be more painful than a kidney stone.
1) Your Partner(s) must do somethingyou can't do.
2) Your Partner(s) must do something you don't want to do. (If you don't want to do it, you won't do it sell).
...and the most important one...
3) Your Partner(s) must be able to do something you shouldn't do. Just because you can, doesn't mean you should.
Investor · Louisville, KY · Member since 2017 · 102 posts · 80 votes
6y
@Joe Villeneuve They reached out to me, wanted to pick my brian about starting into Airbnb. When I told them about the laws changing in Louisivlle making STR a pain (needing approval, paying fees, being highly taxed etc) the conversation turned into LTR. Shortly after, they reached out again to talk about LTR and possibly partnering.
Investor · Louisville, KY · Member since 2017 · 102 posts · 80 votes
6y
@Jim Pellerin thanks for the input. I agree, it is very subjective. I think getting into the nitty gritty will be helpful...because of my experience/knowlege/and passion for REI, I will mostly likely be doing more. The 2 gentleman that I am partnering with want it to be passive as possbile.
Does anyone have a joint venture contract/example? or a recommendation on where to find one. There are so many things roles/responsibilites..I want to make sure everything is clear before we get into this.
@Joe Villeneuve They reached out to me, wanted to pick my brian about starting into Airbnb. When I told them about the laws changing in Louisivlle making STR a pain (needing approval, paying fees, being highly taxed etc) the conversation turned into LTR. Shortly after, they reached out again to talk about LTR and possibly partnering.
OK then. You're in the driver's seat. You decide what your worth is, not them. They either agree or they don't agree, but remember this, they came to you meaning they need you.
CA (orange county) · Member since 2018 · 10 posts · 3 votes
6y
@Justine Scheuher
Whenever you give, there's always a return. Let's keep that as a principal. If you are going to handle most of the work and you have the experience
Then simply ask for a bit more. If you are partnering equally, then you should receive a bit more if you'll be handling more and for them is just passive. Simple math and simple business.
Investor · Louisville, KY · Member since 2017 · 102 posts · 80 votes
6y
@Moustafa Adel I like it. Now, any suggestions of what that "bit more" should be? I have never partnered before so I don't know what to value my hands on role. It will be a conversation with my partners, clearly, but I want to have an idea what I could ask for and then go from there. To keep it simiple, lets just assume they would be 100% passive investors. (We are BRRRRing and keeping them as LTR). Thoughts?
CA (orange county) · Member since 2018 · 10 posts · 3 votes
6y
@Justine Scheuher
Partnership isn't easy. If you feel this path isn't for you, then step away.
Going through with it, then having your expertise and time since they 100% passive. Means that you'll be finding the deal, Contracting and mainly supervising the rehab then screening the tenants and so on. Right?
So either you get a bigger share from equity after rehab or you all put in the same initial investment and you get a bigger share from the cash flow. In my experience, these 2 points will decide weather they will go with it or no.
Let's say you get bigger share from rehab then you will decide if it's worth or not. Not every partnership is worth it. Getting 10% more from the cash flow for example might be enough for you and you will have equity in a house with less money than you doing it by yourself. Again is it worth it or not. My answer might be vague but it all depends on what you will get out of it and if it's worth it.
Investor · USA · Member since 2015 · 325 posts · 447 votes
6y
@Justine Scheuher and @Joe Villeneuve
Joe is totally right on this one. They came to you. They don’t have any idea how to do it. If all the work is equal I would ask for more of the split maybe 50/25/25. I know what I bring to a deal and I feel like it could not be matched by a partner.
Joe is totally right on this one. They came to you. They don’t have any idea how to do it. If all the work is equal I would ask for more of the split maybe 50/25/25. I know what I bring to a deal and I feel like it could not be matched by a partner.
...and in the end, it's not based on what you "can" bring...just what you "are" bringing.
Rental Property Investor · joppa, MD · Member since 2012 · 4 posts · 2 votes
6y
@Joe Villeneuve
Knowledge is attainable. How much is taking the reigns and controlling your own destiny worth? Priceless. Unless they are bringing something else to the table, put in the time and do the research..... go solo and you will be glad you did.
Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
6y
@Justine Scheuher Hey Justine, kudos to you for being proactive and learning all that you can.
First thing you have to realize and I had to come to terms with this myself: Not everybody has the willingness, fortitude, or even interest to learn REI, this is just the reality. I cannot tell how many friends and family I've told about REI and all they want to do "BitCoin" and in most cases "nothing". (and there is nothing wrong anyone one of those things).
So, what you can do is this: Help your partners get to what they want (I'm guessing great return on their capital) and you will get all that you deserve for your knowledge and experience.
Don't get stuck on slicing and dicing %s especially in the beginning.
Remember, partners giving you their hard-earned capital is a great thing in the first place, and it means they believe that you can deliver. Celebrate that!
HIGHLAND, MD · Member since 2011 · 160 posts · 141 votes
6y
@Justine Scheuher
How does it benefit you to have them as partners? If they want to put in an equal amount of money now everything gets split 3 ways and you have to do 3 times as many deals or 3 times larger deals to make then same money you would have made on your own. Why not offer them some equity % or debt payment arrangement where you are in control of the deal and management and they can get a piece on the backend when you ever sell it. With 3 partners, deciding on anything is 3x more difficult
Without reading the entire thread, I’ll say this sounds like a disaster. A threesome rarely ends up with everyone satisfied, let alone excited for the next one.
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
6y
Originally posted by @Account Closed:
Without reading the entire thread, I’ll say this sounds like a disaster. A threesome rarely ends up with everyone satisfied, let alone excited for the next one.
You might find out............................................................................................................................thread.
Knowledge is attainable. How much is taking the reigns and controlling your own destiny worth? Priceless. Unless they are bringing something else to the table, put in the time and do the research..... go solo and you will be glad you did.
So knowledge just magically appears....with no effort in attaining it. I guess you don't need knowledge then to control your own destiny.