To business or not to business, that is the question...

2 Replies

hello all well educated, informed, savvy, handsome/beautiful BP peoples!

I am considering working with one of my best friends in real estate investing. Over the past year I have done my homework to understand what I can so far about the field. I have also possibly targeted an entry level market I would like to get into. However, after just buying a house for my family and rehabbing it myself, I lack the capital currently. Enter best friend. My friend has had his house for some time now, and he hasn't quite bought into the idea of investing yet but he is very interested. He can procure a sizable HELOC on his current property that we could leverage to get started. Now, he likes the idea of benefiting from monthly cash flow. I like the BRRRR strategy. But how do you go about splitting the cash flow of a property between two people? do you want to do that?

One thought I considered is having a small corporation business for my friend and I, which would receive the cash flow and we could allocate payment funds accordingly. This consideration however lead me down a rabbit hole I an not very familiar with. I do plan on doing my research, and one stop to doing it is asking you wonderful people.

Hence the question! do I pursue a small corporation business for my friend and I or do I not. for those of you who do invest this way maybe you can fill me in on the pros and cons.

thank you all for reading and connecting

Nate

I would, as it puts everything in writing and law as to how things are split.  However, I will caution you that things could get tense over time, at this point with you not contributing capital, what value are you bringing to the business relationship, your friend's alternative would be to go it alone and keep 100% of the profits.

Aaron

That is a good point. Ill be bringing the other two elements of the deal, the knowledge and hustle. He would operate more as a "private lender" but wants to benefit from the cash flow as well. Could he cut and leave in the future, sure. Would I be planning in the background how to effectively invest on my own, you bet. Relationships do indeed come and go, and ultimately I would like to stand on my own. But in the mean time, having a business with a long time friend doesn't seem to scary to me and is worth the risk.