Newer Investor BRRRR Strategy Question

1 Reply

Hey BP forum! I'm trying to figure my next steps for my REI future. I currently live in Everett, WA and have been following BiggerPockets for the last few years Here's a little about my situation: 2 years ago (March 2017) I purchased my first investment property in which I did a live in flip and currently reside in. Now I'm house hacking by renting out one of the bedrooms. I purchased the property through an auction company and hard money lender. After refinancing from the hard money loan I was at 200k for my current loan. I invested 75k into the property. I completely rehabbed the property including adding a 3rd bedroom adding to the overall square footage. With current market conditions and similar properties on the market I would estimate the property to now be worth 375k-400k. I'm at the point where I'm ready to continue the BRRRR strategy. However, my lifelong best friend is planning on selling his home in California, quitting his job, moving and restarting here so we can invest into multi-family properties together. Our goals are to create passive income through rental properties and flips where opportunity allows it. With all that being said we've gotten to a point where we are deciding a fair and equal point for both of us going into this together. We've come up with two options and I want to ask BiggerPockets for advice: Option #1: I can refinance my current property and take out exactly what I've invested into it. Basically owning my house 0 down and I get back every other dollar in addition to that for the rehab. Which in return I would invest back into the next property. Option #2: My buddy could buy into my current property by paying me direct and getting his name on the title as well. Giving him and myself 50/50 ownership of the property. This in return would give us an upper hand refinancing the property together for the next property we would like to get. How would I create a fair number to give him in order to make it work on both sides? Overall, our intentions after either option is to open up a business account and an LLC. We both have agreed to put in 50k each to start. We'd like to get a duplex or flip next. Any advice or input is greatly appreciated!

Go with Option #1, put the same amount of $s as your friend in the LLC and most importantly have a written agreement spelling out who does what, how profits are calculated/distributed and what happens if one of you wants out.

Best friends and good business partners aren't always the same thing.  Its going to seem like overkill putting the details in writing when you are partnering with a person you've known forever, but trust me you'll be glad you did if something goes south.......and it will likely save your friendship at that point as well.