Long overdue success story - BP partnership

44 Replies

@Corey Davis I have partnered with 3 other individuals in the past. My first partnership was a disaster, but the other two have been good (but a little biased as they involved people I knew really well).

@Corey Davis I guess you didn't listen to the podcast where I explained that! :)

Long story short - husband of very close cousin, went into partnership with him/them, found out they didn't know what they were doing. In essence I trusted people I shouldn't have trusted. I got out when things turned south but it caused me to lose money.

I coach all my clients to set up a buy-sell agreement that covers death, disability, retirement, voluntary sale, and divorce. I also coach clients to insure their relationship and it doesnt hurt to buy key man insurance that acts as insurance, an asset, and a banking source for future deals.

Dawn,

I just read this (after listening to podcast 29) and am interested in talking with you about setting up a similar partnership as the one you and Mehran have.

Since I'm a relative newcomer to BP, is there a way we can set up a separate conversation so you can discuss further and see if this is a possibility? If so, how can I contact you?

Forrest Baumhover

@Forrest B.

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Great story - partnering or joint venturing is definitely the way to go. We joint venture on most of the projects that we do but the model is slightly different. Front-end JV partners can either go on title or take 1st lien holder position (most of our foreign JVs take lien holder), they put up 100% of funds to purchase & repair the property to rent-ready retail (all of which is documented with video), we do a line item bid for all repairs and work from progress payments. Most of the properties are then rented as shared housing and sold off to passive investors. Front-enders get 10% on their funds from day1 and 50% of profits from the back-end sale. Average return on the front-end is running between 20% & 30% in about 6 months. The JV partner is secured on title and we are able to work exclusively with JV agreements....forming separate LLCs for each deal gets a bit cumbersome and expensive.

Our back-end partners usually buy the property outright as a passive investment. Each one is renovated & rented and sold at a price based on net cashflow with a discount. We use a 10% cap for each deal and guaranty a 10% net return for 18 months which covers any repairs or vacancy that might drop the return...if it happens, we reach back into our pockets and repay the JV partner the deficiency to bring the property back to 10% net. Our rental model is very unique and produces much higher than normal rents. Our back-end buyers don't concern themselves with appraisals as those are all over the board....they buy strictly on net cashflow and return. We are able to offer some financing to back-end buyers depending on the deal, up to 50% of the purchase price.

We have a couple of backend properties available as examples. A 4bed/2 bath brick home with partially finished terrace level on a cul-de-sac with net rents of $18,540 annually is available at $160k for a 11% net return. We only deal in net numbers as pro-forma is more pie in the sky. It's in a northeastern neighborhood near Northlake in metro Atlanta.

We have another property a 5bed/3ba that will produce net rents of $22,000 annually and is available for $150k for a 14% net return. It's in a very nice, desirable older estate neighborhood slightly west of Atlanta with about a 15 minute ride to downtown.

Our front-end JVs enjoy the returns without the headaches of landlording. Back-end JVs acquire a rented, managed & performing asset with an above market return. Joint venturing allows each party to benefit from the talents and skills each brings to the table. Our model works because of our unique rental model. Partnering allows out-of-state or country partners to do deals as Dawn and others do. They can profit and still remain secured on title. I like our model as the JV partners maintain control of the property and we only get the bulk of our profit by performing. Happy Investing!

@Dennis Romano ,

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Raymond

@Dawn Anastasi

Great story. As we are both in Milwaukee, I'd love if we could meet up because I'd like to hear more about your partnership terms and structure. I have some out of state folks that would be interested in partnering with me on some deals (they have property here that I manager now), and have been thinking about how the terms should be done. I'm not sure how to send a request for connection on this forum... maybe you could help me with that too.

Originally posted by @Dorothy Templer:
@Dawn Anastasi

Great story. As we are both in Milwaukee, I'd love if we could meet up because I'd like to hear more about your partnership terms and structure. I have some out of state folks that would be interested in partnering with me on some deals (they have property here that I manager now), and have been thinking about how the terms should be done. I'm not sure how to send a request for connection on this forum... maybe you could help me with that too.

On the left side of the screen under the person's name, click on the "Connect" link and then click on "Send Colleague Request". You can also send a private message by clicking "Send PM".

Originally posted by @Carlton B. :
@Dawn Anastasi That was a great story. I'm not sure if people understand the amount of that had to into that deal. How did you guys do the paper work? where did you get the operating agreement?

Since we were not in the same place (Mehran in CA, me in WI) we communicated via email and Google Docs. The operating agreement came from an attorney. Nowadays with the internet, partnerships are much easier (as long as you work with the right people).

@Dawn Anastasi

Great story! There's so many different ways to get involved with REI and I'm learning each day.

I'm going to PM you to ask about the attorney you used. I'm interested in setting up an LLC partnership agreement as well and I'm looking for expert advice.

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