What do you look for in a partnership on long term rentals?

Question

I'm currently looking at a couple potential deals around the 12%-20% CoCROI, typically making $100-$250 a month. Are deals like this worth going into partnerships over? I've talked to a few other investors and most have a minimum of 8% at $150 a month but as far as I know, that's not with JVs. What's your requirements for long term rentals and partnerships?

Account Closed · Answer

@Elijah Williamson

$100-$250 is extremely low for cash flow unless you have noticeably included ALL worst case scenario numbers.  Dividing that by 2 isn’t likely to produce enough of a return to make it worth anyone’s time. Shoot for a couple deals within your own cash to prove a track record.

Marshall Magnus · Answer

@Elijah Williamson

I am new to real estate investing as well, so please take this with a grain of salt. In my experience outside of real estate the best returns in a profession come from seeking excellence and the chance to learn and refine a practice.  As someone who is interested in learning, exploring, and generating a name worth having in the industry, I would take the opportunity to participate in a deal with someone else’s funding, even if it meant my financial gain slight. Sometimes that might mean mild profits during the growth phase.  The deals that make large profits and build wealth will come in time.  As an inexperienced investor, I would not pass up on the chance to make my name known with a financial supporter and gain the experience from the project. Josh had mentioned that the cash investor would probably like to see a majority stake, and it might make sense to give it to them. I guess you need to decide, at this point in your career, if you would rather make your gains in cash or experience paid for by someone else. Whatever you decide I am sure it will work out as long as you do it with passion.

Josh Arnold · Answer

@Leon Doucette  the model of 51/49 sounds great, however might be a tough sell if they are financing 100% of the please let me know how that goes. thats giving you full control of their cash and seems like an unreasonable ask. The typical I would say is 50/50 however some people like better returns for their money and might request 60/40 in favour of the cash investor.

Leon Doucette · Answer

@Elijah Williamson first off I'd like to say welcome to BP. Just like you I'm new to real estate as well. I am construction electrician and throughout my years in the business have met some great people. Two years ago I did a huge restaurant job for a guy who owns a chain of restaurants in my area. While doing these restaurants I got to know the owner very well. He was heavily involved in the construction of the restaurant and we work together very well. We have just sat down and hammered out a deal where we are going to purchase a piece of property and build a fourplex on that property. His only responsibility is to do the foundation for the building and to completely Finance the project 100%. My responsibilities are project manager, general contractor, and overall construction of the project from start to finish including all permits necessary. So I guess to answer your question, what I look for in a partner it's someone I can work with well. Someone that's easygoing not a high-strung personality, someone that has the skills to compliment mine, and most importantly someone I can trust and that I know has my back just like I have their back.

The issue I'm having right now is trying to figure out which business structure or entity to use for our partnership. We are planning to build and hold rental properties trying to structure our company with me as a 51% and him at 49% leaving all business decisions in the end up to me.  Good luck and feel free to reach out anytime.