Grand Rapids, MI · Member since 2014 · 75 posts · 19 votes
Looking through the forums, it seems that most of the partnerships that I read about are typically involved with flips instead of buy & hold properties.
Has anyone considered joining forces with a partner to purchase a larger buy & hold compared to purchasing a smaller property on your own? I'm hoping to purchase a two or three unit in the next couple of months before the snow hits, and could really take advantage of a nicer property in a better location if I were to join forces with another investor.
Looking forward to hearing both the good and the bad!
Rental Property Investor · Olympia, WA · Member since 2014 · 777 posts · 744 votes
12y
I am at the end stage of a 24-year partnership. We started with three partners. One went bankrupt after about 5 years and we had to buy out his shares. The two of us have had good and bad days. Early on we determined the relationship was more important than the $. My partner is retiring and ready to be done with repairs, tenants, etc... I will buy his shares and carry on ... I still have 15 years of ambition:) We may ink the deal this week, effective Jan 1st. (I'll write about it after it's done).
We started with a 4-plex. Moved into 6 units. Then traded up to 13, added a few more before trading into commercial. The partnership currently has 78 units: 66 apartment/commercial and 12 SFR / duplex.
LESSONS LEARNED: (not an exclusive list)
Each partners ability to maintain their own finances affects the partnership! Their credit affects the partnerships ability to purchase ... at good rates. Or the need to buy one out (ready or not!)
Common goals, personal values and ideals make decision-making much easier.
Clear communication and defined roles are a must. Make time to evaluate where you are at different stages - roles can change (We had a military partner that was gone for 4 years). Know who will get paid for what beyond partnership shares.
Have a defined exit plan. Account for unexpected events (death, divorce, change in life goals).
Have fun together! Take the wives to dinner, travel to Hawaii, go scuba diving, skiing ... at company expense!
Don't get greedy! Greed destroys relationships!!
Don't take yourself too seriously. Be flexible (my partner was the most flexible ... he almost always did what I said!)
Partnerships have advantages and disadvantages. So many end in disaster. We are probably an exception having lasted this long. I've enjoyed and benefitted greatly from it personally, professionally and financially. I'm ready for the change, looking forward to accomplishing my next set of goals to be accomplished beyond the partnership.
Investor · Redondo Beach, CA · Member since 2013 · 147 posts · 50 votes
11y
This has been a great thread! Truly appreciate the experience being shared @Curtis Bidwell!
I often hear mixed advice in regards to taking on partners.
In my case, since I'm a pretty new buy and hold investor, I've often been advised to continue to acquire properties on my own and exhaust all of my capital/financing resources first before taking on a partner. This is a slow and steady approach that I've been using so far to get my first 2 properties.
On the other hand, taking on a partner who could split the down payment & rehab funds would greatly accelerate my plan to grow my real estate portfolio. Yes, profits would be cut in half for each deal, but long term I think there'd be many more deals with greater potential.
Assuming the partner is a trusted hardworking fellow who shares the same goals, skills, and work ethic, I'm curious as to whether it's wise to exhaust my own resources and creative strategies (i.e. like a cash out refinance since I don't have more than 4 properties) first before entering into any partnerships. Any thoughts would be appreciated.
Lender · Rochester, NY · Member since 2014 · 3k+ posts · 1k+ votes
11y
@O'brian R.
I would suggest exhausting resources and doing it on your own. A partnership is hard with a spouse, let alone another partner. Yes, some people have success..... But more times than not I have seen things go south. One person always ends up putting in more effort than the other. It is human nature.... Just my opinion though. Also in the end..... You can only get 10 mortgages in your name with conventional, even if you go in with a partner....... So you end up having half the profit of ten houses versus the full profit of ten houses.
Rental Property Investor · Olympia, WA · Member since 2014 · 777 posts · 744 votes
11y
@O'Brian R. Taking on a partner is more than just a financial consideration. While a partner can help with finances, they can also help with troubleshooting and brainstorming through purchase/sale, tenant/landlord, financial and other issues. The value may be far greater in having someone to go down the path with so you don't feel overwhelmed or stuck in a given circumstance.
If you have a good support team -that you have ready access to (family, realtor, CPA, handyman, GC, attorney, etc..) then a partner may not be as necessary.
A partnership is a relationship that needs nurturing just like any other, and they are a great blessing if handled well. We concluded our partnership after 24 years at the end of 2014. But we still stay in touch and have coffee, lunch together often. I put together a retrospective of all our properties over the years in a photo-book format that I delivered to he and his wife over dinner a couple weeks ago. The history and memories were pretty cool and went a long way in extending the value of our years together.
I'm not advocating one way or the other, just trying to add balance to your overall thinking and decision making.
Investor · Gainesville, VA · Member since 2014 · 118 posts · 76 votes
11y
How do you structure the monthly cash flow between partners? For example, I currently have several SFH but my brother in law has expressed interest in getting a rental together. I assume we would have to form a formal partnership, put income into the partnership and then dispense cash out to each other each month or let it sit in the partnership and grow for the next purchase. Is that close?
Wholesaler · Holiday, FL · Member since 2013 · 571 posts · 221 votes
11y
I have that same question -
I personally maintain a 'slush fund' for expenses and repairs and so forth. From it I just pay whatever each of my properties requires. But a partner may not do that - so should the partnered property then maintain a individual cash-account surplus of it's own? Or should each partner trust that the other will always be able to come up with their half of the future costs? <g>
How do you structure the monthly cash flow between partners? For example, I currently have several SFH but my brother in law has expressed interest in getting a rental together. I assume we would have to form a formal partnership, put income into the partnership and then dispense cash out to each other each month or let it sit in the partnership and grow for the next purchase. Is that close?
How do you structure the monthly cash flow between partners? For example, I currently have several SFH but my brother in law has expressed interest in getting a rental together. I assume we would have to form a formal partnership, put income into the partnership and then dispense cash out to each other each month or let it sit in the partnership and grow for the next purchase. Is that close?
Hi Allison - I know this post was a long time ago, but I'm wondering if you ever figured out how to manage cash flow with your brother in law? I'm thinking of a similar partnership with a family member. In my case, I would manage the entire deal and my partner would put up the majority of the money. We would split the profits 50/50. That is all well and good if it is a simple distribution of funds every month, but what if there is a large cap ex expense or what if one us wants to pay down the mortgage with our profits?
Investor · Gainesville, VA · Member since 2014 · 118 posts · 76 votes
9y
@Nicholas Q. - never pursed it any further. I did get a personal loan from my mother-in-law and father and used those to buy a couple rental properties. I just paid off my dad's loan this month and have a couple more years on my mother-in-laws loan. Found this route the cleanest and the least complicated.