Is partnering on buy/hold a sensible approach?

8 Replies

I am talking to an owner facing foreclosure in Feb. He wants out, and current reinstatement/payoff is $168,400. House value is around $190,000, but it will need a new roof (approx.$7000). I have enough for 10% down, but not the needed 20%. House is in good shape other than roof. Based on rental comps in the area, it should rent in the $1500 range. I am new at this, so would like your thoughts on seeking a partner - 50/50 on all expenses, cash flow, and appreciation. Is partnering in this scenario a good idea?

I think of business partnerships like a marriage, so make sure whoever you partner with is someone you can work well with.  Business divorces can be very messy.

That being said, I do think it is a good idea.  It reduces your risk by reducing the amount of personal capital you have to invest, and hopefully you can find a partner who has a complimentary skill set.  Ultimately, it may allow you both to accelerate your investing plans.

Look into buying the house “Subject to” the existing mortgage

Ken,

If you can bring on a partner and still make the numbers work, I don't see why not. Do you have a partner in mind? Obviously a concern that arises with a partner is not following through with their commitments. If you don't already have a partner in mind I would advise reaching out to some of the more experienced buy and hold investors in your area. Also consider asking for a proof of funds. 

Best of luck

Thanks for the feedback. I don't have anyone yet, but I do have some people that might be willing, and who have more experience than I do.

Hi @Ken Harris . Partners are a great way to share the load and spread the capital needed to invest. Make sure the deal is actually a deal though. If the value is $190 + a $7k roof, that's basically a $200,000 house that only rents for $1500. After accounting for necessary reserves there will be no profit to split. You would be using the property more as a savings account while you wait for appreciation to bump the value.

If you do move forward with it, make sure your partner understands that it is a long term, low cash flow deal and that all roles and responsibilities (yours and theirs) are defined. Also make sure that the exit strategy (both for the property and the partnership) are identified and documented. The Operating Agreement for an LLC is a great place to put all that information. You don't want any future issue to have a negative impact on the investment, so cover every avenue.

Best of luck!

Personally I don't think that is enough of a discount. You make your money when you buy. Gold, guns, cars, real estate---doesn't matter. 

I may not have explained things clearly. I can get the house for $169, and perhaps even lower. The roof is not leaking, and I'm getting different opinions as to whether it has to be replaced. If it does, it will cost around $7000. The current value of the house is about $190.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here