All Forum Posts by: Ryland Taniguchi

To answer your question here, I would recommend writing out all your values and then score potential partners on a value match. I have a questionnaire like this that I use to secretly score partners and employees. It helps to be clear on your purpose in life as that is an obvious value alignment. Your list maybe totally different from mine because you may have different values.

Some of the things that I value:

Ability to collaborate versus compete.

Ability to communicate.

Leadership ability.

Integrity even when things go bad. 

Ability to be accountable.

Contribution to this planet over making money.

Someone who renders more value and service than they get paid.

Someone I can trust.

Someone who is responsible and frugal with money.

Someone who can put their ego aside and eschews politics. I hate political people who tell you want you want to hear to gain power.

Someone who is a lifelong learner.

Someone who is disruptive and wants to change the world.

Partners and employees don't realize this but I score everyone I work with every quarter (March, June, September and December). If someone does not match, that is how I decide to diplomatically cut ties with them.

Best way to protect your downside is through have very good legal documents that show the way during the worse case. In companies involving a brand that I have worked hard to build I always license the brand to the partnership just in case things don't work out.

 For me, I think 1 out of 5 partnerships have worked in the past. The main thing is to try to maintain as good of a relationship that you can even it doesn't work out. Extra challenging for me since I am more direct and to the point and this can hurt people who are more sensitive.

But for the one partnership that works like a lifelong marriage that is a wonderful thing when you find that. I have several of the most amazing partners in my real estate brokerage, in a book being published, in a hard money fund, in co-organizing a self-directed IRA group, and in some real estate deals. I can do 5 times more with a great lifelong partner. The partnerships allow me to get so much done and that is why I choose this route. One can't be good at everything. For me, a great partnership brings a ton of stability and lots of cash flow.

I still have 4 partner areas needed that did not work out this last year and that is in the areas of construction, wholesaling, flips/development and BRRRR. Because I haven't found the right partner yet, these area of my business have not been stabilized and seems like a roller coaster. Hard to build sustainable systems without the core people in place and I have been doing these things for 16 years.

The way I do things may not work for most people. I succeed through lots of failure. My mindset is to fail frequently, fail fast and fail forward. I have made millions by making way more mistakes than everyone else.

 The local economics in Seattle are very strong. The demand for housing way surpasses the supply. Housing prices will continue to go up.

But what is going on the world is what would lead to a major correction.

There is an incredible amount of currency crisis uncertainty related to the European Union. Brexit has exposed five bankrupt countries in Portgual, Ireland, Italty, Greece and Spain. If any or all of these five were to go into a sovereign debt crisis, they could exit the European Union and start devaluing their currencies. It could not only disintegrate the European Union but also start a chain reaction of currency devaluations similar to that which lead up to the Great Depression. Any crisis in Europe would directly affect China.

The global economy is susceptible to a meltdown. Banks would fail and then bank lending will stop. It would happen even as interest rates dropped. The music stops.

I am sure the global leaders are working together to prevent a global meltdown and so that will determine whether we have a correction like 2000 or something worse than 2008.

So here is how I am shifting gears.

1) Got out of flips completely. Seems risky to me based on my understanding of holding costs during crashes. Also, I only buy now pretty much in Seattle for development and Tacoma for rentals. I have been avoiding all other areas for the most part and wholesaling like my deals in Arlington, Newcastle and Lakewood.

2) Moving to a strategy that I call the 10-10-10 Rule.

10 projects a year that meet the goal of Wealth Preservation. Super safe instruments like Notes with 50% LTV and government guaranteed tax lien certificates.

10 Projects a year that meet the goal of Financial Independence. For me, I am doing 1% rule cash flow properties using the BRRRR strategy in Tacoma. Anything that I pencils to flip, I look to get a 1% rule cash flow as additional criteria.

10 Projects a year that meet the goal of Accerated Wealth. For me, this is building high density urban townhomes only in Seattle with a minimum 100% IRR.

3) Shifted from aggressive deal accumulation to a conservative accumulation of cash.

4) Focus entirely on building up a self-directed IRA group and raising millions for a hard money fund. For hard money, I think it is risky to hold the paper so I partnered with underwriters with over 20-years experience that have systems to sell the paper in 60-90 days on the mezzanine markets.

5) Have completely stopped being reliant on any bank financing. Have replaced the take-out BRRRR financing with private money 30-year fixed 6% loans. Moving to private money over hard money. I would not rely or overuse a bank line of credit... That will be gone when banks go bankrupt. Don't crosscollateralize anything.

6) Buy gold and put it in a ditch. 

Partnering and living together sounds like a challenging situation. Partnerships are like marriages. You can get along great, respect each other and even communicate with each other effectively... But that does not mean it will work out. Often it doesn't work out because you have different values.

One maybe risk adverse while the other a conquerer.

One may need tax write-offs and the other may need more income.

One may like short term returns and the other long term returns.

People can change and their situations may change. What if one gets married? Divorced? Moves away? Etc.

When I was younger, house hacking was doable. But as soon as I got married, the strategy did not work anymore. 

That being said, nothing ventured nothing gained. I have mostly done real estate through partnerships and have learned a lot of myself and relationships. But in the long run most of the partnerships don't work out.

Might be better to just partner on one transaction to test the waters.

 A friend of mine is renting two rooms nearby in Seattle in their downstairs at $125/night and $150/night in the same area. The regular numbers don't fit my number for cash flow, which is at minimum getting the 1% rule. 

I do something similar. I purchase with hard money at 11% and 3 pts and then refinance out on a 30-year fixed private money at 6%.

Anyone know of an experienced vacation rental property manager in the Seattle area? I have never done any vacation rentals and looking to add an expert to my team of advisors.

I am looking to turn my flips into vacation rentals instead.

Having acquired 80 rental properties all in partnerships, I can tell you the good and the bad of partnerships.

Like your husband said, different people have different goals. I can't tell you how many partnerships I have done where we hit our the stated goal on the transaction and yet different people have different goals, different perspectives and different tax situations.

I have found many partners want to see quick profits like in a flip and that often comes with high transaction costs and high taxes. But that maybe bad for me if my goal is to reduce my tax basis and increase my depreciation write-offs.

Also, people simply have different values. Partnership is likes marriage and it is very difficult to find the right match. Just like in a marriage a partnership requires very good communication.

Sometimes the partners have different experience levels. I can't tell you how many times a partner is expecting permits as an example to be done quick. Often times things like permits is out of one's control but it is a frequent point of contention.

Biggest problem I have with partnerships is that when anything goes over budget, it is often me paying for it even when it was originally agreed to split the costs per the agreed on split. Seems like there is always one partner always doing more.

Nevertheless, I still build my investment Portfolio through partnerships but I know that 4 out of 5 partnerships will not likely be a match.

In a buyer's market, having good realtors can be an asset as there are deals that pencil through short sales, HUD homes, etc. In a seller's market today with limited inventory, the market is so efficient that it is nearly impossible to find deals on the MLS that pencil through a real estate agent.

I do find lots of deals on the MLS but they are 100% land development deals.

And I have lots of experience with this as an agent myself since 2005 and having a team of 30 agents at Keller Williams. If I know at least 800 agents out there and am not getting deals that pencil from realtors, I am doubtful that you would get better luck.

Better to network a lot with wholesalers and if you have time get good at marketing for deals yourself. 

When I started investing in 2000, all the mistakes that I made were from bad advice from agents. For example, stay away from condos. There are 1% rule deals in Pierce county and be self-disciplined to only finding properties that cash flow under the 1% rule. Appreciation in King County properties is great but I would do that only after having a solid portfolio of at least 20 1% rule cash flow rentals. In addition, the time to buy for appreciation in King county is after the market crashes.

I watched 80% of the investors get wiped out in 2008. Very few of us survived. Don't do what everyone else does or you will get the results that everyone seems to get and exposing themselves to market crashes.

Stick to cash flow and the 1% rule. And my advice to you is that you won't be able to rely on agents to find solid 1% rule deals. This is an area that you will have to get proactive in yourself.

I think you get a variety of opinions about whether to start with a buyer's list and that's because every market is different. If you are in a hot market like mine where you have 100 investors that will take an actual flip deal in a heart beat, you don't need a buyer's list.

As far as knowing what criteria people are looking for, that is easy. They just want a deal. 70% of ARV minus construction costs. For rentals, 1% to 2% rule cash flow. Not rocket science. You don't need a buyer's list to figure this out.

The best way to build a buyer's list is to constantly find deals. The buyer's will find you.

Network like crazy with all of the other investors.