I am 32 years old, a high school teacher and I currently have two positive cash flowing rental properties that I've acquired over the last 8 years. I would like to continue to build my real estate portfolio and retire on its income in 18 years at the age of 50. Two coworkers who have collectively flipped 3 houses came to me and asked if I'd like to partner with them in starting a real estate investment LLC. Both of them have values similar to mine, although both of them are 20 years older than me. One of them has connections with wholesalers while the other has some knowledge, experience and enthusiasm. What are the 3 most valuable questions I can ask before deciding whether or not to partner with them?
Hey @Nathan Shankles ,
I would want to know about the exit strategy that the three of you would use. They will clearly want their money out before you would. That could be a great situation because you would be able to buy them out and own the entire portfolio if that's your goal or really bad if you just want a few homes paid off at the time you retire hitting your cashflow number.
I would also want to know how large everyone wants to grow the portfolio. It sounds like you are all very similar but make sure one person does not want to leverage up to a 300 unit building and while another is very conservative and just wants a few properties here and there.
Last, partnerships always sound good in the begging because everything is great. I would sit down and think of the bad stuff that could and hopefully won't happen but have a written plan if it happens. I.E. if one person get divorced and needs the money from the portfolio they will be bought out at 80%... or whatever.
I think if you are all on the same page with similar goals I would go for it!
What's in it for you?
What's in it for your partners?
What is the toughest situation they have ever been in and how did they handle it?
It is not a real estate specific question but can give you a sense of their fortitude and problem-solving thought process.
@Derek Diamond thanks Derek - great advice.