Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
In areas of the country where prices have gone UP, and the only properties left are scraps, would you consider partnering with other like minded investors to purchase higher quality properties? Why or Why not?
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
13y
There are two types of partners: Money Partners and Business Partners. Both are important.
When I first took on money partners, my business went from flipping 2-3 houses per year to 15-20 houses per year.
A number of years later I got a business partner and more money partners. This grew my business from 15-20 houses per year to over 100 per year plus a sizable portfolio of rental homes.
More money partners has also allowed me to buy hundreds of apartments that I couldn't have bought without them.
If the whole of the partnership is greater than the sum of its parts, it's a no brainer. I'm always looking to develop these relationships. If you want to stay small, do it on your own. If you want to grow, partners are necessary.
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
13y
Karen, I can't speak to your specific question, however I can say my business has exploded since I started partnering.
Working with partners has allowed me to get more accomplished, and not just because a money partner put up the funds. I have partners who manage projects and properties much better than I could alone.
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
Ned Carey I probably should have done a catchier title for more responses. I've just seen so many people complaining about lack of inventory, me included, and thought I'd pose the question.
You're right though, there are many reasons to consider partnerships, from money, management, experience, etc.
As developers, on the Medical Office Building we are currently working on, and previous projects, we design them as condo projects, allowing smaller investors to get in. However; a condo unit is still a little over $1 million dollars, but there are investors on BP that are in that range.
I'm sure other areas are the same, though the prices are out of a smaller investors range, if investors partner up, and get into commercial type properties (office, multi family) in the long run they may find they have better quality tenants, and generate higher returns and appreciation for the future. Just a thought.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
Originally posted by Ned Carey:
Karen, I can't speak to your specific question, however I can say my business has exploded since I started partnering.
I've only recently started partnering (currently two different partners in two different markets), and I feel the same way. This may not answer Karen's question, but I've definitely seen the benefit of partnering, even if it's not specifically to pick up higher-priced properties.
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
J Scott It doesn't matter why you do it, the idea is to get people thinking outside the box, and looking at other ways to put deals together, etc. Every market, and investor has their own challenges they deal with, and rather than some of the less experienced investors thinking it's time to take their marbles and go home if they can't find the "deals" I want to challenge them to look at different ways to put deals together. Whether more expensive properties, other types of properties, different types of financing, etc. Maybe i'll do a blog on this subject ;)
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
13y
There are two types of partners: Money Partners and Business Partners. Both are important.
When I first took on money partners, my business went from flipping 2-3 houses per year to 15-20 houses per year.
A number of years later I got a business partner and more money partners. This grew my business from 15-20 houses per year to over 100 per year plus a sizable portfolio of rental homes.
More money partners has also allowed me to buy hundreds of apartments that I couldn't have bought without them.
If the whole of the partnership is greater than the sum of its parts, it's a no brainer. I'm always looking to develop these relationships. If you want to stay small, do it on your own. If you want to grow, partners are necessary.
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
Brian Burke, I see you're a night owl too. When I wrote this post it was in response to areas such as O.C. where the market for fast deals at cheap prices has pretty much evaporated. Knowing that there are many newer investors on BP, I wanted to get them thinking about how to transition in to other ways of investing, etc.
Though we've never taken on partners ourselves, as we lived in a smaller area were some of the bigger fish, now we find ourselves in a situation where the projects are similar to what we have done, but the land costs are much higher, therefore; are weighing our options on funding, taking on financial partners, or looking for HML's again.
The project has good profit potential, in a great location and will be very marketable, so ? Decisions, decisions!
From reading your posts it's definitely encouraging, knowing that you took in partners and have benefited so well. I hope you'll do another podcast on BP, you had some little jewels that come in handy!
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
13y
You often hear naysayers saying how partnerships are risky and they often go bad. Yet how many hundreds of thousands of successful partnership are there? Ever hear of Warren Buffet and Charlie Munger? I think that partnership turned out OK.
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
13y
Karen Margrave yes, a night owl...it's the only time I have to hang out with my BP friends. Too much work during the day!
It was probably good to be the big fish in a small area (Redding, right? Thanks for moving by the way, I took over your role as big fish there).
Now you are in a big area, it means it's time to become a bigger fish to elevate your game. That means partners. Not just you, of course, this applies to the newer investors as well. Getting a partner to elevate to better properties could mean stepping up to $100K houses instead of $50K houses just as much as stepping up to $5 million properties instead of $500K ones.
Investor · San Jose, CA · Member since 2012 · 2k+ posts · 3k+ votes
13y
Hi Karen,
Here's another night owl. I'm a small fish in a huge pond. After my wife and I had exhausted our resources and borrowing limits, I've decided to take on two partners in the last 1.5 years. My wife was very skeptical at first, but things have worked out wonderful. One partner is on the verge of taking on over $1M in mortgage debt while the other one is taking on $500k and still looking for more opportunities to take on more debt where it makes sense. Now we're looking at scaling it to something much bigger. I'll be posting my questions on here in the near future when we've decided which direction we're going to take.
Some people are skeptical of partnership, but 1/2 of something is better than 1/2 of nothing. I believe Brian Burke feels the same way because I've seen him stated it on here before.
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
Brian Burke We had a good niche in Redding that we liked working. I love it there. We still have a house on 20 acres out by Shasta College, that we leased out when we moved. What projects are you doing in Redding? Are you developing stuff or picking up REO's and other good buys? It sounds like you've surpassed where we were with the number of houses, etc. you own.
Minh L. Your prices in San Jose are much like down here in so Cal. I lived in the bay area as a kid, in fact was born in San Jose. Sounds like you've found some good partners.
Residential Real Estate Agent · Pearland, TX · Member since 2013 · 163 posts · 32 votes
13y
Karen Margrave As a new REI I would definately entertain a partnership with someone at any level price range on properties. Everyone above has posted great reasons to partner.
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
13y
Karen Margrave, I've been flipping about 10 to 20 houses a year there since 2001, with the exception of 2005 through 2007 (I backed off because I didn't like the market). I've build a few things and done some subdivisions, but that was before the crash. Most of my acquisitions there have been courthouse steps stuff. What was your niche? Medical office even back then?
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
Brian Burke Yes, we've built some medical office, and office buildings, a couple of multi building small office parks, a medical dental clinic (that we sold to the Rancheria - the sale had to actually be read into the Congressional record), some retail/office condos (actually we helped draft the criteria for the City of Redding on those) a residential subdivision, and other houses, etc.
If you know of any HML's that do construction financing, we're in the market, or JV Partners. We need someone that is experienced and understands the business. Good $ though ;) I have it on Marketplace, but.. need to start really pushing it next week calling people, etc. Finally have the numbers together etc.
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
13y
Wow, Karen! Great résumé, sounds like you had all kinds of fun. I know a good HML for commercial stuff, the downside is (last I knew) they were at 50% LTV. PM if you want the contact info. I think your best bet might be an equity partner. If you go with debt you might get your best result if you find the debt partner yourself rather than going the broker route, but that's easier said than done.
Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
13y
Karen Margrave In my world of creative finance, I can’t imagine doing anything without partners. In my case, though, these are money partners only. I guess in order to truly grow big I will have to relinquish some control eventually, but I am not there yet :)
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
13y
April, that depends on your situation. If you mean "partner" by bringing money to the table with the desire to earn a return, a newbie might be willing to give you a higher share of the profits than an experienced investor. BUT that will come at a much higher risk because the newbie's lack of experience might cause the deal to result in a loss, and if you are a newbie too you can't add much value to prevent the deal from going awry. An experienced investor might be willing to offer a lower split of the deal, but their experience might result in a higher rate of return despite the lower split. To that end, you are probably better going with an experienced investor that is seeking funding because they add the value of experience and you add value by bringing capital.
If by "partner" you mean contributing your time and services, you might try to partner with an experienced investor so you can learn. Most experienced investors don't need active partners, but might accept someone as a mentee or intern. You could also consider partnering with another newbie, but that cold result in the blind leading the blind and add less value to your endeavor than learning from someone with experience.
As you can see, there really is no right answer to your question, and the "best" answer depends on what you are looking to get out of the partnership.
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
Well let's get some of those that answered back @Ned Carey and @Brian Burke and Ben Leybovich
Personally we've never worked with partners. Though in southern California projects are higher dollar values and we are probably going to need to do that. There are GREAT projects with high profit potential, but bigger dollars. On the upside, in Orange County, our unemployment is only 6.5%, high wage jobs, etc. so stable area to invest.
Jefferson Kim We actually looked at a lot over in Fullerton for a spec house, but unfortunately the numbers didn't work. I've also seen some potential for rehabs there too. We are working on developing a medical office project on N. Harbor, just down from St. Jude, in the hunt for HML or partners on that, but it's a larger deal.
Are you looking for SFR, Multi family, or ? Fullerton or surrounding areas?
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
Jefferson Kim I heard there's a big development going in that will be housing for students or ? I wonder if that will give an initial hit to the current multi family market when those tenants move, or if the new housing will appeal more to new students coming in, etc.?
Do you have any ownership in that hotel? I know some hotels are franchises and not company owned.
Don't know why but my mentions didn't work for Brian Burke and Ned Carey.
As for St. Jude, they are finishing up a $312 million dollar expansion to their patient tower. Plus they own several buildings in the area, and lease space. I just did a mail out to property owners in the area, there are 88 buildings with 35 owners), on our project to try to pre sell. I will also be doing marketing to all medical professionals on the condo units (though we are still in planning stages so I can only take reservations on those)
If you are interested in the area around St. Jude, and medical type space you can check out the website. I have some comps on there and projected income, etc. (Let me know your opinion of the website)
If you aren't working with an agent and need help locating multi family or any other type property, we belong to SoCalMLS, and I'd be happy to work with you.
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
13y
Jefferson Kim, the structure depends on the deal. For a simple SFR flip, a one-off deal is probably best done using a note and deed of trust structured as debt, either a straight note or participating debt (interest plus a % of the upside). This avoids the cost of creating an entity for a one-time deal. This works best if you have a money partner already lined up that you have a relationship with.
For a larger deal such as multifamily, I use a Limited Partnership or LLC, with the investors funding the entity and the entity holding title. In CA I prefer the LP structure because of the high state fees for LLCs that produce a high level of income, but you should check with your tax advisor for specific entity selection advice based on your income and tax situation. If I use a LP, I'll have an S-Corp or LLC as the general partner so I get the liability insulation (this LLC's income will only be the flow-through NET from the property's LP so it is less likely to trigger the high LLC gross receipts tax that is easily triggered at the property level). Be sure to follow the SEC regulations related to the sale of securities, because that is likely what you will be doing.
To all of the other people that read this thread, don't misconstrue that the above complicated structure is required for simple flip deals. This structure is for larger deals where the exposure and needed formaility can be financially justified as compared to the overall cost. In other words, spending several thousand dollars to organize a $100K flip deal makes a lot less sense than it does on a $5 million apartment complex.