$10k - $20K Partners for Cash Flowing Multi-Units

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$10k - $20K Partners for Cash Flowing Multi-Units

Thomas Fish
Real Estate Investor · Saginaw, MI · Member since 2008 · 136 posts · 24 votes

(My friends used to beat me in Monopoly when they ganged up on me and worked together to get all the good properties. I got to thinking about this today while pondering ways to take down some of these great, cash-flowing deals I've been writing options on here in Michigan.)

What I'm looking for is $10k - $20K partners to come in on these deals for 50% of the equity and 50% of the cash flow. I'll put up the rest and manage the properties.

A couple examples: a 7 unit, 100% rented, partner pays $20K gets $1000 /mo cash flow plus 50% equity as it builds.

A 15 unit, 100% rented, partner pays $20K, gets $1800/mo cash flow and 50% equity as it builds.

An 8 unit, 100% rented, partner pays $20K, gets $1000 per month cash flow plus 50% equity.

I have a bunch of them, can't take them all down myself. If interested, please write me at my regular email address (bigzoo) and let's talk about the possobility of doing some of these.

Thanks.

Tom

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Jon Holdman
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
15y

You've left out some key numbers, like what you're paying for this place and the terms on the loan. Is the property being used to secure the loan? Are you personally signing on the loan?

Given $19,200 in annual income and 38%, I get that the investor is putting in about $50,000. You're putting in $10,000. I get that you've managing the property and are entitled to a management fee. Seems like that should be included in the expenses and then you and the investor should split the remaining cash flow 83 (investor, $50K on the line) and 17% (you, $10K on the line). Assuming a typical 10% PM fee (high on 16 units, I think), you'd be getting $760 a month in management fees ad another $6,400 for your percentage ownership.

Now, if you're personally liable for the debt and the investor is totally off the hook, perhaps your ownership is higher than 17%. And, perhaps you're entitled to something more, since you're found and bought the deal. But 50%? When you have little at risk?

The 50% rule, which certainly applies to a 16 unit, $475 a month deal would put NOI at $3800 a month. Part of that is the PM cut. Just a wild guess, but I'm guessing the purchase price at $240K, with a 25% ($60K down payment. Perhaps only $200K, with 25% down and $10K in closing costs. $150K at 6% for 20 years is $1075 a month. That leaves $2725 a month in cash flow.

Don't know if my guesses are accurate. Be helpful to have a few more numbers. If they're in the ball park, that's a pretty interesting deal. I suspect I'm low on the price (2% rule would put price at $380K, but I'm not sure how you buy a $380K property with only $60K into it), so I'm skeptical of your cash flow projections. How about giving us the rest of the numbers?

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  • Thomas Fish
    OP
    Real Estate Investor · Saginaw, MI · Member since 2008 · 136 posts · 24 votes
    15y

    Sorry for the typo: possibility.

    0Reply
  • Gregory Childs
    Flipper/Rehabber · Orlando, FL · Member since 2008 · 263 posts · 147 votes
    15y

    Thomas,
    Sent you an email.
    TTFN,
    Greg

    0Reply
  • B H.
    Member since 2010 · 5 posts · 0 votes
    15y

    Email sent

    0Reply
  • Mitch Kronowit
    SFR Investor · Orange County, CA · Member since 2009 · 1k+ posts · 1k+ votes
    15y
    Originally posted by Dr. Thomas Fish, PhD:
    A 15 unit, 100% rented, partner pays $20K, gets $1800/mo cash flow and 50% equity as it builds.

    Seriously? That's like over a 100% cash-on-cash return! If that is correct, I'll definitely contact you. I think I have $20k laying around here somewhere. :D

    0Reply
  • Sharad M.Pro Member
    Carlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
    15y

    I hope this doesnt start the 50% argument, but whats your definition of cash flow?

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    1Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    15y

    Geeez Tom, that's getting awfully close to a solicitation for an investment! But the cash flow mentioned doesn't say it's before or after expenses, but I won't ask.

    1Reply
  • Account Closed
    Full-Time Investor · Charlotte, NC · Member since 2009 · 2k+ posts · 1k+ votes
    15y

    i'm wondering this too...are you guaranteeing every month that you'll pay out that amount?? or is that based on your projections, be it convervative or optimistic? if you're signing that you're paying that amount, i'd take a look...like to know what these properties are selling for and what rehab is needed

    0Reply
  • Thomas Fish
    OP
    Real Estate Investor · Saginaw, MI · Member since 2008 · 136 posts · 24 votes
    15y

    To Bryan, FinanceM, and Max. I am defining cash flow as the gross rents minus the monthly expenses including debt service. It's the remaining amount left over from the monthly intake. We would split that 50-50. / What I'm guaranteeing is that whatever the cash flow is in any given month, we would split that 50-50. The properties I've put together so far have had 95% - 100% occupancy. When one tenant falls off, we'd replace him with another tenant. / What I'm soliciting is for a partner...I hope I'm not crossing any line into the realm of "investment solicitation," as with a private placement or something. / Also, the properties I've put together, and am putting together, are already up and running with tenants in place. They don't need rehab first. (A couple I'm looking at need a little bit of rehab, but it's minor in the scope of things.)

    0Reply
  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    15y

    I think you're fine with the solicitation Dr. Fish...until something goes wrong!

    Gotta love the securities laws!

    0Reply
  • Account Closed
    Full-Time Investor · Charlotte, NC · Member since 2009 · 2k+ posts · 1k+ votes
    15y

    so we're putting up the downpayment for a loan basically? why don't you say what the gross rents are...right now i have no clue if your monthly numbers is what i get, or if we divide that by 2 to share...it's easier if you give me the numbers and i analyze it the way i like, instead of you analyzing it for me, bc now i'm trying to go backwards by getting the original numbers from your analysis to analyze my way...does that make sense??? thanks. curious what your monthly expenses cover as well

    2Reply
  • Thomas Fish
    OP
    Real Estate Investor · Saginaw, MI · Member since 2008 · 136 posts · 24 votes
    15y

    To Bryan: yes, a partner coming in would put up most of the down payment (about 95% of it). I put up the rest and manage the properties. It's hard to give exact numbers on the gross rents because each project varies. An example of one I just put together tonight is this: 16 units @ $475 per unit = $7600 / mo gross rents. Expenses including debt service = $4400 / mo. Net = $3200. In this scenario, an incoming investor would put up $50,000. I'd put up $10,000. Each month, we'd split the $3200, which is $1600 / mo for each of us. In that scenario, which is actually a little weaker than some of the other deals,the investor's annual return is $19,200, which is 38%. The seller and I are still negotiating on a few points that might make this cash flow better. (I don't know if that fully answers your question or not.)

    0Reply
  • Thomas Fish
    OP
    Real Estate Investor · Saginaw, MI · Member since 2008 · 136 posts · 24 votes
    15y

    To Bryan: I guess I was just posting this ad here as a general solicitation to see if there were any interested parties. To talk specifics about each deal, we can do that via email. I'm also re-tweaking my website where I'll be posting the different deals that are available as they come up. Thanks.

    0Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    15y

    You've left out some key numbers, like what you're paying for this place and the terms on the loan. Is the property being used to secure the loan? Are you personally signing on the loan?

    Given $19,200 in annual income and 38%, I get that the investor is putting in about $50,000. You're putting in $10,000. I get that you've managing the property and are entitled to a management fee. Seems like that should be included in the expenses and then you and the investor should split the remaining cash flow 83 (investor, $50K on the line) and 17% (you, $10K on the line). Assuming a typical 10% PM fee (high on 16 units, I think), you'd be getting $760 a month in management fees ad another $6,400 for your percentage ownership.

    Now, if you're personally liable for the debt and the investor is totally off the hook, perhaps your ownership is higher than 17%. And, perhaps you're entitled to something more, since you're found and bought the deal. But 50%? When you have little at risk?

    The 50% rule, which certainly applies to a 16 unit, $475 a month deal would put NOI at $3800 a month. Part of that is the PM cut. Just a wild guess, but I'm guessing the purchase price at $240K, with a 25% ($60K down payment. Perhaps only $200K, with 25% down and $10K in closing costs. $150K at 6% for 20 years is $1075 a month. That leaves $2725 a month in cash flow.

    Don't know if my guesses are accurate. Be helpful to have a few more numbers. If they're in the ball park, that's a pretty interesting deal. I suspect I'm low on the price (2% rule would put price at $380K, but I'm not sure how you buy a $380K property with only $60K into it), so I'm skeptical of your cash flow projections. How about giving us the rest of the numbers?

    4Reply
  • Thomas Fish
    OP
    Real Estate Investor · Saginaw, MI · Member since 2008 · 136 posts · 24 votes
    15y

    Jon, good points. I was posting here to generate a general interest and then get into specifics by email. By next week, I'll have some deals posted on my website... and I'll list that here too, if that's kosher. It seems like when I post email addresses or websites, they get X'ed out. Anyway...

    I see it a little differently than how you've laid it out with a sort of 80/20 split. I'm doing them 50-50, mainly because I'm here, I've tied up the deals, I've driven all over hells-half-acre to see and feel out the places, I've talked with the sellers, the tenants, the zoning people... I've bared my %$*# to negotiate something do-able. And then I'll be dealing with the tenants and the hands-on stuff for the next 3-5 years. Soooo, all things considered, it's worth the 50-50 split.

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    15y

    Doc Fish,
    I think here is where many of us will have a different view on your numbers posted:

    $4400 in expenses INCLUDING debt service would be only 57.9% of gross rents. Typically, and on average, units with $475 monthly rents per door in aprtment settings will have 50% just in operating/capital/vacancy expenses. Then tack on debt service.

    SO your deal posted would look more like this: $7600 gross rent / $3800 expenses / $3800 cash flow BEFORE debt service. Now, plug in what the exact monthly payment for debt service is and that is what the cash flow would be. If your offer is a 50% split of cash flow, then we can now see what we would earn on an average monthly basis after you give the financing details.

    Your delas look good, but until all the numbers are given, it is difficult at best for us to analize for investment.
    I could be interested if the returns were good enough.

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    2Reply
  • Thomas Fish
    OP
    Real Estate Investor · Saginaw, MI · Member since 2008 · 136 posts · 24 votes
    15y

    Thanks Will. I can write you directly with specifics of each deal so you can break them down. I've erred conservatively, the numbers come out as I've said. Each deal differs. I will send specifics to you. Thank you.

    0Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    15y

    What's the deferred maintenance like and the tenant turnover???

    That can kill and wipe out a ton of cash flow for years.Sometimes current owners put a lot of things off to increase cash flow while they own and then want to dump off to someone else with a bunch of problems.

    So cash intake is only one component.

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    1Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    15y
    Originally posted by Dr. Thomas Fish, PhD:
    Thanks Will. I can write you directly with specifics of each deal so you can break them down. I've erred conservatively, the numbers come out as I've said. Each deal differs. I will send specifics to you. Thank you.
    OK, waiting for your email. My email is in my signature.
    -Will Barnard
    Podcast Guest on Show #130
    0Reply
  • David Hughes
    Real Estate Investor · Bentonville, AR · Member since 2009 · 19 posts · 1 vote
    15y

    Tom, you and I exchanged a few emails on this topic earlier this month. Please send the specifics of each deal to me, too.

    Thanks, Dave

    0Reply
  • David Hughes
    Real Estate Investor · Bentonville, AR · Member since 2009 · 19 posts · 1 vote
    15y

    Tom, you and I exchanged a few emails on this topic earlier this month. Please send the specifics of each deal to me, too.

    Thanks, Dave

    0Reply
  • Account Closed
    Full-Time Investor · Charlotte, NC · Member since 2009 · 2k+ posts · 1k+ votes
    15y

    isn't it just easier to post the numbers here instead of having to send PM's and emails? i don't need addresses..just put the numbers here...thanks

    0Reply
  • Account Closed
    Full-Time Investor · Charlotte, NC · Member since 2009 · 2k+ posts · 1k+ votes
    15y

    isn't it just easier to post the numbers here instead of having to send PM's and emails? i don't need addresses..just put the numbers here...thanks

    0Reply
  • Thomas Fish
    OP
    Real Estate Investor · Saginaw, MI · Member since 2008 · 136 posts · 24 votes
    15y

    Joel: On the smaller units, those things are figured into the cash flow each month and set aside in the LLC. On larger units, they are sometimes a part of tranferred escrow, sometimes put INTO escrow up front and deducted from the gross each month as well. Will and David: Will do. Bryan: that will take a lot of space, but I will do that in the near future. THANKS!

    0Reply
  • Thomas Fish
    OP
    Real Estate Investor · Saginaw, MI · Member since 2008 · 136 posts · 24 votes
    15y

    Joel: On the smaller units, those things are figured into the cash flow each month and set aside in the LLC. On larger units, they are sometimes a part of tranferred escrow, sometimes put INTO escrow up front and deducted from the gross each month as well. Will and David: Will do. Bryan: that will take a lot of space, but I will do that in the near future. THANKS!

    0Reply
  • David Beard
    Investor · Cincinnati, OH · Member since 2010 · 1k+ posts · 928 votes
    15y

    Why don't you put the details in a spreadsheet (maybe you already have them there), upload to Google Docs and post a link.

    0Reply
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