Long overdue success story - BP partnership

Long overdue success story - BP partnership

Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes

Okay, this is going to be quite a long overdue success story, as I should have posted it months ago, but I was recently reminded of wanting to do it when I re-read @Mehran K.'s post about his success story from October.

Back near the beginning of the year, I had posted in the Bigger Pockets Marketplace about the success I had in the Milwaukee market. I put out a general inquiry if I would be able to possibly help anyone else.

Well, I got quite a few emails out of that post! One of which was Mehran who lives in sunny California whereas I am here in snowy Wisconsin. Long story short, we joined forces and purchased a small 2-bedroom single-family here in Milwaukee where I live.

The story behind this purchase is quite interesting (at least I think so). I found the property on the MLS (where I get everything I buy) and tried to get an appointment to see it. It was a short sale that was headed toward foreclosure. My agent tried to get an appointment with the seller's agent to see it, but the seller's agent was not responding. (It turned out she was on vacation.)

Since the property didn't have much time left before it went to foreclosure, I looked up the owner information online and found the owner's wife was on Facebook. I sent her a message through Facebook around 10 at night indicating that I'd like to look at her husband's house and gave my phone number.

The next day I received a call from the wife and she set up an appointment for a time to see the property with her husband. He had purchased the house in his bachelor days and once he got married, moved into his wife's house. He kept that house as a rental, but rented to his nephew mostly to help him out, but really they couldn't keep two houses. Add to that their desire to move to AZ as he was retiring from the police force.

I toured the house with the husband and was surprised at what good condition the house was in, considering it was being sold for $21,000. There was some minor cosmetic work -- new paint, new carpet, new kitchen floor, some general cleaning, etc. (approximately $1200 or so).

So Mehran went in on this house 50/50 for both the purchase and the rehab. As you can imagine, for such a small purchase price, we each had to come up with very little money.

For Mehran, he was buying 1/2 a house thousands of miles away without ever setting foot in it in person. And this was also the experience of partnering up with someone who he met through the Bigger Pockets website, not in person first, but via email and phone.

We rented the house out for $750 per month and it's been rented now for several months. In the first couple of months it was occupied, a few plumbing issues came up that were unanticipated, but we have been using the strategy of putting away "reserves" each month for exactly these type of things, and there has not been a month so far that we have not been able to pull some money out after the reserves.

Overall, I would say that even though this is a small house, it was a win to the seller to be able to get rid of it, it was a win for the bank (as they didn't have to foreclose), it was a win for the realtors as they got commissions, it was a win for us as we are getting cash flow (and this first project established our investing relationship), and it was a win for the tenants as they got a nice place to live. (And I would also say a win for the contractors who got some work out of the rehab!)

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Investor · Wichita Falls, TX · Member since 2010 · 3k+ posts · 603 votes
12y

Thanks for writing up the story @Dawn Anastasi, it has definitely been a success in my books so far. There is so much power in being able to connect with people here on BP, in different areas of the country/world. We are just one of many examples of that!

I've also learned quite a bit from working with Dawn. She has more experience and knowledge, not only in her market, but investing in general. So I've gotten quite a good education throughout all this on top of the great deals we've found :)

To the other investors considering similar types of partnerships - Aside from the operating agreement etc, I believe it's extremely important to have similar goals and understanding of each others priorities! Dawn and I hashed this out before we made our first purchase. I can tell it has made all the difference in the MANY decisions we've had to make when issues come up.

See this reply in the discussion

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  • Dawn AnastasiPro Member
    OP
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
    12y

    @Corey Davis I have partnered with 3 other individuals in the past. My first partnership was a disaster, but the other two have been good (but a little biased as they involved people I knew really well).

  • Los Angeles, CA · Member since 2013 · 169 posts · 27 votes
    12y

    @Dawn Anastasi so, how did the disaster partnership happen?

  • Dawn AnastasiPro Member
    OP
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
    12y

    @Corey Davis I guess you didn't listen to the podcast where I explained that! :)

    Long story short - husband of very close cousin, went into partnership with him/them, found out they didn't know what they were doing. In essence I trusted people I shouldn't have trusted. I got out when things turned south but it caused me to lose money.

  • Lakewood, OH · Member since 2013 · 193 posts · 60 votes
    12y

    I coach all my clients to set up a buy-sell agreement that covers death, disability, retirement, voluntary sale, and divorce. I also coach clients to insure their relationship and it doesnt hurt to buy key man insurance that acts as insurance, an asset, and a banking source for future deals.

  • Buy and Hold Investor · Nashville, TN · Member since 2013 · 264 posts · 102 votes
    12y

    I loved this story from the podcast, and reading it was equally awesome. :)

  • Real Estate Investor · Waukegan, IL · Member since 2013 · 367 posts · 80 votes
    12y

    @Dawn Anastasi @Mehran K.

    I likes! Good to hear success like this. Very encouraging.

  • Montreal, Quebec · Member since 2013 · 11 posts · 4 votes
    12y

    Congrats Dawn and Mehran! Heartening to see remote partnerships working so well.

  • Professional · Tampa, FL · Member since 2008 · 26 posts · 6 votes
    12y
    Dawn, I just read this (after listening to podcast 29) and am interested in talking with you about setting up a similar partnership as the one you and Mehran have. Since I'm a relative newcomer to BP, is there a way we can set up a separate conversation so you can discuss further and see if this is a possibility? If so, how can I contact you? Forrest Baumhover
  • Dawn AnastasiPro Member
    OP
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
    12y

    @Forrest B.

    you can "call out" someone on Bigger Pockets by using the @ symbol followed by their name. If they are in a thread you are commenting on, you can use the @ symbol immediately followed by the ? symbol and a pop-up comes below the thread with a list of names to message.

    Also you can private message (PM) someone by clicking on the PM link under their name while you're in a thread. You can become their colleage by sending a colleague request.

  • Real Estate Investor · atlanta, GA · Member since 2013 · 456 posts · 237 votes
    12y

    Great story - partnering or joint venturing is definitely the way to go. We joint venture on most of the projects that we do but the model is slightly different. Front-end JV partners can either go on title or take 1st lien holder position (most of our foreign JVs take lien holder), they put up 100% of funds to purchase & repair the property to rent-ready retail (all of which is documented with video), we do a line item bid for all repairs and work from progress payments. Most of the properties are then rented as shared housing and sold off to passive investors. Front-enders get 10% on their funds from day1 and 50% of profits from the back-end sale. Average return on the front-end is running between 20% & 30% in about 6 months. The JV partner is secured on title and we are able to work exclusively with JV agreements....forming separate LLCs for each deal gets a bit cumbersome and expensive.

    Our back-end partners usually buy the property outright as a passive investment. Each one is renovated & rented and sold at a price based on net cashflow with a discount. We use a 10% cap for each deal and guaranty a 10% net return for 18 months which covers any repairs or vacancy that might drop the return...if it happens, we reach back into our pockets and repay the JV partner the deficiency to bring the property back to 10% net. Our rental model is very unique and produces much higher than normal rents. Our back-end buyers don't concern themselves with appraisals as those are all over the board....they buy strictly on net cashflow and return. We are able to offer some financing to back-end buyers depending on the deal, up to 50% of the purchase price.

    We have a couple of backend properties available as examples. A 4bed/2 bath brick home with partially finished terrace level on a cul-de-sac with net rents of $18,540 annually is available at $160k for a 11% net return. We only deal in net numbers as pro-forma is more pie in the sky. It's in a northeastern neighborhood near Northlake in metro Atlanta.

    We have another property a 5bed/3ba that will produce net rents of $22,000 annually and is available for $150k for a 14% net return. It's in a very nice, desirable older estate neighborhood slightly west of Atlanta with about a 15 minute ride to downtown.

    Our front-end JVs enjoy the returns without the headaches of landlording. Back-end JVs acquire a rented, managed & performing asset with an above market return. Joint venturing allows each party to benefit from the talents and skills each brings to the table. Our model works because of our unique rental model. Partnering allows out-of-state or country partners to do deals as Dawn and others do. They can profit and still remain secured on title. I like our model as the JV partners maintain control of the property and we only get the bulk of our profit by performing. Happy Investing!

  • Laguna Niguel, CA · Member since 2012 · 12 posts · 3 votes
    12y

    @Andy Luck I really like your "Front" and "Rear" end idea. How would I get on your list for "Front-end" Investors?

  • FL · Member since 2009 · 2k+ posts · 357 votes
    12y

    @Dennis Romano,

    To make the @ work, do the following:

    Hold down the shift key and type @?

    Look below this Window, and you will see a list of names of people that have posted in this thread.

    Click on the name of the person that you want notified via an email, that you responded to them.

    If you are a Colleague with anyone that has NOT posted in the thread, and you want them to see your post, hold down the shift key, type the @ and the first 4 letters of their First or Last Name.

    Then look below this Window and click on that person's name.

    Raymond

  • Investor · Mequon , WI · Member since 2014 · 58 posts · 13 votes
    12y

    @Dawn Anastasi

    Great story. As we are both in Milwaukee, I'd love if we could meet up because I'd like to hear more about your partnership terms and structure. I have some out of state folks that would be interested in partnering with me on some deals (they have property here that I manager now), and have been thinking about how the terms should be done. I'm not sure how to send a request for connection on this forum... maybe you could help me with that too.

  • Dawn AnastasiPro Member
    OP
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
    12y
    Originally posted by @Dorothy York:
    @Dawn Anastasi

    Great story. As we are both in Milwaukee, I'd love if we could meet up because I'd like to hear more about your partnership terms and structure. I have some out of state folks that would be interested in partnering with me on some deals (they have property here that I manager now), and have been thinking about how the terms should be done. I'm not sure how to send a request for connection on this forum... maybe you could help me with that too.

    On the left side of the screen under the person's name, click on the "Connect" link and then click on "Send Colleague Request". You can also send a private message by clicking "Send PM".

  • Rental Property Investor · Milwaukee, WI · Member since 2013 · 281 posts · 133 votes
    12y

    @Dawn Anastasi That was a great story. I'm not sure if people understand the amount of that had to into that deal. How did you guys do the paper work? where did you get the operating agreement?

  • Dawn AnastasiPro Member
    OP
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
    12y
    Originally posted by @Carlton B.:
    @Dawn Anastasi That was a great story. I'm not sure if people understand the amount of that had to into that deal. How did you guys do the paper work? where did you get the operating agreement?

    Since we were not in the same place (Mehran in CA, me in WI) we communicated via email and Google Docs. The operating agreement came from an attorney. Nowadays with the internet, partnerships are much easier (as long as you work with the right people).

  • Investor · Suwanee, GA · Member since 2014 · 579 posts · 347 votes
    12y

    @Dawn Anastasi

    Great story! There's so many different ways to get involved with REI and I'm learning each day.

    I'm going to PM you to ask about the attorney you used. I'm interested in setting up an LLC partnership agreement as well and I'm looking for expert advice.

  • Wholesaler · Crosby, TX · Member since 2014 · 52 posts · 5 votes
    12y

    That's great you two.

  • Investor/Realtor · Hoover, AL · Member since 2010 · 1k+ posts · 459 votes
    12y
    Dawn Anastasi ... Great story.. Thanks for detailed info of deal....
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