How to find JV partner in rural areas?

Question

Hey BP, I have been looking to get back into real estate investing (I used to have a small portfolio of small multi families that I sold) and I can across a great deal on a 29 unit well under market value. It’s a mix of single families, duplexes, triplexes, 4 and 5 plexes and they are are side by side on the same street. Average price per unit for small multi families here in rural northern PA is 45-50k. The seller of this portfolio said that he would let it go for 35k/unit. These are nice for the area, updates flooring, hvac, electrical, roofs, some having granite countertops etc.

I would love to be able to tackle this deal but it looks like I would need to bring in a partner. The closest REI meetup is for an area 75 miles away. Where would you find a JV partner for a deal like this? Or should I just try to wholesale it as I know that there is plenty of meat on the bone. I tried to buy just 2 of the 4 plexes but the owner wants to keep them as a bundle.

Cody Reid · Answer

That’s some good insight! I’ve never done wholesaling before. I know enough local investors who would each be interested in a couple of these as well and I could cherry pick the ones I want. Thanks Kerry!

Kerry Noble Jr · Answer

So some investors are scared of rural areas unless the economic growth potential fits it. I would find someone local that knows the area.

I would look into wholesaling lets say 25 and see if you can get 4 units (which could be 2 duplexes or 1 4 unit) out of the deal for you to keep.

im down to help you think this one through

Robin Luo xue · Answer

Don't wholesale this! That spread ($10k-$15k equity per door) is massive. You will regret letting that cash flow go.

Since you are 75 miles from the nearest meetup, you need to bring the "City Money" to you. When you pitch this to out-of-town partners, their biggest fear is "Rural = Run Down/Musty."

Here is a tip for your investor tours:
Staging matters. Since the units are already updated (Granite/HVAC), take it one step further. I use a commercial HVAC scent diffuser in the common hallways or the model unit during walkthroughs.
It sounds like a small detail, but walking into a rural building that smells like a luxury hotel (White Tea or Santal) instead of "old basement" instantly changes the investor's perception of the asset class. It screams "Professionally Managed."

Package the numbers, stage the sensory experience, and post it in the BP Marketplace. You'll find a partner.

Stuart Udis · Answer

Price point concerns me. I find it very difficult to believe the current owner properly updated the HVAC, electrical, and roofing, and also spent money on cosmetic upgrades if the units are only worth $45K. The price point cannot absorb the cost of this CapEx, particularly the major building systems. More often than not, properties in this price point have major building systems that become issues because they are nearing the end of their useful life or, if replaced, weren't replaced properly by licensed and insured vendors because the real estate can only absorb the cost of haphazard workmanship. This makes the ongoing management very difficult. Since it's very difficult to operate properties in this price point profitably and equally as importantly sustainably, if there's an opportunity to make transactional profits you should evaluate that option.

Bo Smith · Answer

That's a solid spread at $35k/unit if they're renovated like he says. Just make sure you walk all 29 units, not just the pretty ones - sometimes these bundles hide a few problem properties with the good stuff. Also might want to run your numbers assuming higher vacancy in rural areas, just to be safe. Have you actually been inside most of them yet?

Kerry Noble Jr · Answer

no problem

Kerry Noble Jr · Answer

unless the economic growth potential has great upside*

How to find JV partner in rural areas?

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