New investor, partnership long distance
Hey BP, need some advice on partnerships and long distance investing.
There’s a ton of discussion on partnerships and long distance investing, but not a lot of guidance on doing the two combined.
Background:
I have zero prior experience in real estate or home construction. I have three months of reading/listening to BP, I have read three books on rei, and have talked with various people involved in the industry (accountants, lenders, investors, etc). I currently work full time in a rural area.
Goals: in 25yrs I want positive cash flow of$500k/yr after tax
Resources:
• Time. I’m single and haven’t started a family yet.
• Easy access to cheap, private money
• Reserves, but no working capital yet
• A decent, steady income
• A trusted family friend with an existing network and proven record in a good market. Offering to partner with me and is asking for very little in return (wants to eventually partner on MFR). Knows that I have access to easy capital. The family friend also started working with another newbie investor a year ago and they are having great success.
Current strategy (in order):
1. Flip 2-3 SFR in CA. Build my own capital and gain experience.
2. Find another market where the numbers are better. Build a network from scratch and buy/hold SFR BRRR style.
a. Or
3. Partner with a family friend who has an existing network setup in a great market. Use his network and partner buy/hold SFR. Then partner on step #4.
4. Move into MFR or commercial. Whatever helps me achieve my cash flow goal.
Questions:
• I currently have an opportunity to work with the family friend right now on a flip. The numbers seem solid. I am tempted to skip step #1 & 2 and hop straight to #3. What are your thoughts on this?
• Going straight to step #3 means I’m putting a lot of trust in the family friend and will be more vulnerable given my lack of experience. In your opinion, is it worth giving up the experience gained in #1 & 2? By partnering with him, I am saving myself a lot of time and effort.
• The partnership is further complicated because, not only are we investing long distance, the partner and I are long distance. In your opinion, does this add too much risk?
• We would be forming an LLC and I would have an attorney review the operating agreement.
Your advice is much appreciated!