Okay, this is going to be quite a long overdue success story, as I should have posted it months ago, but I was recently reminded of wanting to do it when I re-read @Mehran K. 's post about his success story from October.
Back near the beginning of the year, I had posted in the Bigger Pockets Marketplace about the success I had in the Milwaukee market. I put out a general inquiry if I would be able to possibly help anyone else.
Well, I got quite a few emails out of that post! One of which was Mehran who lives in sunny California whereas I am here in snowy Wisconsin. Long story short, we joined forces and purchased a small 2-bedroom single-family here in Milwaukee where I live.
The story behind this purchase is quite interesting (at least I think so). I found the property on the MLS (where I get everything I buy) and tried to get an appointment to see it. It was a short sale that was headed toward foreclosure. My agent tried to get an appointment with the seller's agent to see it, but the seller's agent was not responding. (It turned out she was on vacation.)
Since the property didn't have much time left before it went to foreclosure, I looked up the owner information online and found the owner's wife was on Facebook. I sent her a message through Facebook around 10 at night indicating that I'd like to look at her husband's house and gave my phone number.
The next day I received a call from the wife and she set up an appointment for a time to see the property with her husband. He had purchased the house in his bachelor days and once he got married, moved into his wife's house. He kept that house as a rental, but rented to his nephew mostly to help him out, but really they couldn't keep two houses. Add to that their desire to move to AZ as he was retiring from the police force.
I toured the house with the husband and was surprised at what good condition the house was in, considering it was being sold for $21,000. There was some minor cosmetic work -- new paint, new carpet, new kitchen floor, some general cleaning, etc. (approximately $1200 or so).
So Mehran went in on this house 50/50 for both the purchase and the rehab. As you can imagine, for such a small purchase price, we each had to come up with very little money.
For Mehran, he was buying 1/2 a house thousands of miles away without ever setting foot in it in person. And this was also the experience of partnering up with someone who he met through the Bigger Pockets website, not in person first, but via email and phone.
We rented the house out for $750 per month and it's been rented now for several months. In the first couple of months it was occupied, a few plumbing issues came up that were unanticipated, but we have been using the strategy of putting away "reserves" each month for exactly these type of things, and there has not been a month so far that we have not been able to pull some money out after the reserves.
Overall, I would say that even though this is a small house, it was a win to the seller to be able to get rid of it, it was a win for the bank (as they didn't have to foreclose), it was a win for the realtors as they got commissions, it was a win for us as we are getting cash flow (and this first project established our investing relationship), and it was a win for the tenants as they got a nice place to live. (And I would also say a win for the contractors who got some work out of the rehab!)
Always great to hear a win-win for all sides!
@Dawn Anastasi May I ask if you formed an LLC together, placing ownership on title in the name of the LLC? Can you share some points in the operating agreement if so?
The reason I ask is that I have been discussing a similar situation with someone in another state and am struggling over how to set up with proper protection for both parties.
We do have an LLC together as well as a lengthy operating agreement (about 20 pages). We also have a shared bank account. The bank has online deposit, so I deposit remotely (via using a scanner) and then we both get an email when the deposit hits the bank. It also has Bill Pay, so that's how the monthly distributions are scheduled.
We use this on both this property and on the 2nd one we purchased together (a duplex).
Some points in the agreement:
- Definitions (I believe this is a legal thing)
- Economic interests, membership interests
- Issues regarding death, divorce, dissolution, termination, etc.
Thanks for the recap Dawn, sounds like a winner and good to see you have decided to continue the partnership with a second purchase. Congrats you two!
Awesome details on a great story. Thanks for sharing.
How are you being compensated for management?
Nice job working together @Dawn Anastasi and Mehran!
It is exciting to see partnerships like yours start from BP!
Just imagine if both parties were contributing equally for the purchase + rehab. Then imagine if certain things like management were handled by an outside party. Essentially the person doing the management and day to day operations would get compensated separately. You don't have to make it complicated. We've chosen to take a simple approach.
Thanks for writing up the story @Dawn Anastasi , it has definitely been a success in my books so far. There is so much power in being able to connect with people here on BP, in different areas of the country/world. We are just one of many examples of that!
I've also learned quite a bit from working with Dawn. She has more experience and knowledge, not only in her market, but investing in general. So I've gotten quite a good education throughout all this on top of the great deals we've found :)
To the other investors considering similar types of partnerships - Aside from the operating agreement etc, I believe it's extremely important to have similar goals and understanding of each others priorities! Dawn and I hashed this out before we made our first purchase. I can tell it has made all the difference in the MANY decisions we've had to make when issues come up.
Thanks for sharing, it always good to hear investors in the area are doing well for themselves ad others
great story guys! This is definitely a +1 for the positive things BP has to offer column. Really encouraging story for a newbie like me!
Great win win partnership. That is the way it should always be.
If anyone has been burned before, they will truly appreciate win win relationships when they fine one, it's gold. Thanks for sharing.
Congrats, Sounds like a good deal.
Nice work both of you Dawn and @Mehran K. and congrats! Great to see this on BP!!
What an inspirational story Dawn!
I have been hesitant about partnering with other investors, for various reasons, yet your story is very positive. Thanks for sharing.
Congratulations, guys! Way to go!
What an awesome story! It really is encouraging to see a success that happened so close to home! - May I ask your strategy for looking for properties on MLS? What type of properties to you target? an specific area?
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