Is $12K A Year Worth A 25-75 Split To An Experienced Investor?

Question

Hey BP Family!,

I had a question to you all. I found a few rental properties in Cleveland, Ohio that are in D class and C- class neighborhoods that are under $100,000 (besides one) that can produce between $7,500 and $12,000 in net cash flow annually. My question is, is this enough for an investor to want to be the cash partner in a 25-75 (where they would receive 75%) split partnership or is this too low?

As I a young person who's trying to get started in the world of real estate investing, I am trying to aim to get some sort of start before graduating college. I figured finding a deal with a decent return could be of benefit, but I also know that some people have their preferences of what a "good" deal is and where they would want to purchase.

I wanted to ask before I tried presenting the idea so this way I would know if I need to refine my search!

Thank you to those who respond!

Jackie Jake · Answer

Hi Da'Shawn , I'm from Cleveland, Ohio, born and raised, now residing in Texas and I have a interest in out state investing. Have you considered Seller Financing if possible ?

Marc Rice · Answer

@Da'Shawn Murphy

I recommend getting your credit straight. Start working on that now asap as it takes 1+ year sometimes to get it back. Also start saving. Then you can use LimaOne for your first deal and they’ll fund rehab and purchase up to a percent.

Forrest Williams · Answer

Many investors aren't going to be interested in a D class property. You can change many things about a building, but you can't change its location. If you want to get started in investing, house hack. Best way to get some skin in the game, learn new skills, learn your market, etc.

Jon Reed · Answer

Starting out the amount a deal cash-flows is not going to be the deciding factor for an investor. You will be hard pressed to find an investor (who you do not already personally know) who is willing to be your 100% financial backer when you don't have any experience or skin in the game. If I was the investor then I would want to see at least 25-50% of the cash investing coming from you. This way I know that if you get upset or don't like doing this that you wont just walk away and leave me hanging with a D class property.

My suggestions would be to find a person that knows and trust you personally already who would be willing to support you financial as you take this first step. Or you should get a part time job with a property management company or real estate company in the area to get experience before trying to find someone to lend you six figures to invest.

James Wise · Answer

I think you'd probably have better luck getting licensed and working for investors as an agent and possibly handyman. Folks aren't going to be as willing to give you equity as they won't be able to fire you if you don't hold up your end of the deal adequately. But being a young agent with some hustle, you'll get folks to take a flyer on you. As you gain experience the demand for your services will grow as would your compensation.

Da'Shawn Murphy · Answer

No, I had to quit my W-2 job so I could take this internship that I am so I can graduate early in December instead of waiting until next August of 2022. I have been trying to find the right deal that shows the house is undervalued and then be able to present this opportunity to someone who would be willing to put up the iniotial funds and credit, and the nwould be able to get all of the money back out. Have been certainly trying to find alternatives.

Marc Rice · Answer

You could also use a hard money lender such as LimaOne and then refinance out. Do you have a W2 job or 2 years stable 1099 returns?

Da'Shawn Murphy · Answer

HI @Jackie Jake! I have not yet considered seller financing as of currently since most of my funds goes to my tuition that is not covered by financial aid and other loans. I have spoken to my grandfather about this after the 5th month of me graduating since he plans on moving after I graduate and he owns his home free and clear and this would allow me to utilize the equity in the home to create more deals.

Da'Shawn Murphy · Answer

That makes sense. I tried to do a lot of the research to find the deal and help manage the tenants since I have done that for about three years now so I am familiar with that. I figured if I do the majority of the work, especially upfront and still insist on them taking 75% of the profits, then I could show the experienced investor how serious and committed I am to being a real estate investor.

Da'Shawn Murphy · Answer

That is what I figured, it is the lack of credibility that is holding me back from finding partners. I know that personally I wouldn't walk away because this is a field that I am really anxious and excited to get into, those neighborhoods are just areas that I live or have lived in and I am familiar with. I can definitely understand skin in the game to show true commitment for someone who doesn't know me. I agree that it would probably be best to find people I personally know first, then this can help me build credibility and experience.

Is $12K A Year Worth A 25-75 Split To An Experienced Investor?

Is $12K A Year Worth A 25-75 Split To An Experienced Investor?

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