Updated over 2 years ago on . Most recent reply
MTR start-up advice
Hi All,
This might be lengthy. I am a Physician Assistant in the Vancouver, WA/Portland, OR area - a bit burnt out on medicine after 2+ years in the ICU during COVID. I FINALLY paid off $200K in student loans. I am saving about 3K a month after maxing out retirement and putting some additional into index funds. I would like to get into renting to travelling providers/nurses and renting to people displaced by fire, etc. I recently met someone, who has become an amazing friend and is a great human. He also happens to be a real estate titan in the mid west and owns probably 7000 doors. I was telling him of my plans to get into the medium term rental space and mentioned that I was looking in other markets, because my market is so high-priced and there would be limited return. He offered to go in 50/50 with me as a partnership, but wants me to start in my local market.....which I understand. I know the area, can be available, etc. I just am not sure how I will afford getting into my market anytime soon or have cash flow. I have considered arbitrage to start and earn a little more capital. I have about $16k in cash.....I have about $200K or more in equity in my house, but don't want to over-leverage myself. Do I just wait it out and save, save, save? Look for an off-market deal that doesn't need work (does that exist?)? Go outside my market? I trust his judgement and opinion as he has been doing this for 40 years. He said what everyone else says......that most people never do their first deal. I will. I don't want my impatience to get moving put me in a bad place. I'd appreciate any guidance or ideas. Also, how would you structure the 50/50 partnership? Does each person put in half of the down payment and both names are on the mortgage? (I would have to mortgage).
I appreciate any help!!
Lisa
Most Popular Reply
Wow! What a great opportunity for you! And congratulations on paying off $200k of debt! That alone is a huge accomplishment.
My bet is that your partner is wanting you to gain experience of operating a rental. There’s a bit of a learning curve when you own your first deal and being close by helps mitigate potential risks. I used to own 12 doors out of state before I had my first rental in my backyard and it would have been much bette if I had started in my backyard first.
With that being said, there are some loan products out there that are useful to help get you in the game earlier. Most investment properties are needing 20-25% down to purchase through conventional financing. On top of that, some lenders are needing a reserve saved in an account which could delay your purchase if you do not have that yet.
I know of one lender only needing 10% down and you can use a HELOC to liquidate your equity as a down payment. We just helped a BP member from Beaverton purchase a new home using the equity in his old home. His name is @Grant Schroeder with Academy Mortgage. He’s out of the Newberg/Hillsboro area. He’s got a good size portfolio in the Portland area and he can help look at your financials and see what makes sense for you. Once you two determine what makes sense and when, then he can get you connected to an agent.
Typically in a partnership you have a financing partner and an operating partner. But it differs for every deal and relationship. It seems like he may be the operating partner in this because he has the skills, network, and knowledge to succeed. I’m assuming he has an attorney that you two can hire to draft an operating agreement to set up these terms. Highly recommend that you two have an agreement set up!
Hope that helps! What an awesome opportunity! Let us know if you have any other questions or if you need help analyzing a deal 👏👏👏