All Forum Posts by: Soniel Estime

@Soniel Estime

Respectfully, it’s not necessarily your sister in laws fault on your previous contractor experience. When handling referrals, it is still the job of the investor to verify. It is the inherent risk / reward that we face. I’ve had my teeth kicked in and I’ve wanted to blame, so I know how you feel. But blame is cheap, and it’s a bad habit. I’m learning to look at myself and grow into a better operative mindset where I scrutinize my own decisions and pursue a variety of referrals, wise counsel, etc. and move forward slowly on everything.

Moving forward, in my opinion, one can partner with family and be ok. I partner with my brother in law and have for 4 years. I had to learn he is more hands off but he’s good at finding money. My money has gone a lot of places in the same 4 years as I became I dad x2 during this period. So it’s a win-win. But we had everything in writing and we are both two strong minded men who talk very honestly with each other all the time. Assuming things is where 99% of dysfunction comes from.

Before viewing a partnership or referral scenario as a marriage view it as a date. Do one small thing and then decide if it’s a bad relationship or a positive one.

Good luck.

@Soniel Estime

I would partner with a few of my contacts mainly skilled workers to cover my weakness and blind spots. But my goals and vehicles to get there are different than yours.

Have an attorney draft up an air tight partnership and hold everyone accountable.

Don’t fail.

It never hurts to get more experience but if you need the capital bring them on and let them know There is a chance of losing money. Consider the brrrr strat.

Contractors on the BP are pretty good and are of a higher standard. Do your due diligence and read the google reviews.

Good luck!

@Soniel Estime

From my experience, the biggest mistake that friends make in partnering is in not making sure that each person has different strengths and clear roles are not set from the beginning.

When those 2 things don’t happen, 1 person always ends up doing the majority of the work.

If you’re sure that each of you bring something unique to the table and if you are able to assign roles for each person to handle, then do it. If not, then don’t.

@Soniel Estime it's a tough question. Lots of people who are very successful talk about how they first started out using other people's money and that often came from friends and relatives. But it's a dangerous game, especially if you're not experienced. I'm guessing they want to invest with you because they've seen you have some success and don't know how to go about it themselves. If they lack experience, this could be setting you up for failure because they're unlikely to understand the risks inherent in real estate investing, may not have realistic expectations around returns, and may want to be active partners (which could be ok if they've got a skill to bring to the table). You should get your agreement in writing, which would protect each of you, but it doesn't avoid hurt feelings should something go wrong. If you don't need investors, I'd probably pass. But if you want to help them figure out where else they could invest since they are, after all, your friends, you could refer them to another option like investing in turnkey rentals, note investing or a syndication. Lastly, there may be a way to dabble in a partnership where there's not a lot of money at stake to see what kind of partners they're going to be. For example, let's say you want to buy a property to flip or BRRRR and you have the money for the down payment but not the repairs. Let's say the repairs are estimated at $20,000. Maybe they could split the cost of funding the repairs with you borrowing the money from them at a decent rate of return for them - say 10%, which is comparable to a hard money loan and more than they're probably earning on their money anywhere else right now. That should be no more than a 6 to 12-month transaction at the most and they're each only $10,00 into the deal. It goes without saying you have to run your numbers right (use the BRRRR calculator from BP) but, worst case scenario it goes bad, you could probably get a personal loan to cover their losses if you absolutely had to. These aren't big numbers, you'd be turning it over quickly, and if it didn't work out you aren't locked into a long term relationship with them. Best case scenario it goes really well and you'll have found some solid business partners and kept the relationships in tact.

@Soniel Estime

Hi

I’ll add my anecdote.

Me and two college buddies wanted to flip a place and try landlording. One was in sales and a people person (think leasing), I had building experience, and the other claimed to be a numbers guy (thought he would be the deal analyzer), but we are all numbers guys. Bought a duplex in December 2015.

We all had time (lots of drinking weekends) and money to pool for a down payment 1/3 splits all the way.

We had slightly different ideas about how to do things. I found myself project managing and putting in most of the effort. It felt like a manager/employee situation from the get go.

None of us were the best partners. I wanted the project done quickly so i could focus on my home renovation. I was the pusher and we all sucked at contracting out at that time (didn’t have much money or a realistic value of our time back then or at least I didn’t). I also wanted to know how to do everything non-construction so I micromanaged a bit and asked lots of questions. To boot I was more of a perfectionist vs a good enough person.

We finished with a refi for 48k 8 months later and 1200 cashflow per month. Felt like a home run at the time. We did it again

In spring 2017 but my wife and I closed on another duplex around the same time and got pregnant midway through while still renovating my place, so 5x the pushing. Finished it fall of 2017.

Landlorded together until summer 2019 and then sold them. Partnership turned into more of a me making them fix the places and them not wanting to or not thinking it was necessary when things broke down/didn’t work (hvac overhaul, retaining wall crumble, turnover things). Every issue I wanted to talk out a bit more than them. I wasn’t really prepared for when they started talking to each other and then telling me how they wanted to do things or excluding me from the conversations entirely. I’m dense so missed the subtle anger they were feeling for months.

After we sold the second duplex they stopped talking to me except for crps (end of jan) and eventually taxes. I got 1 to talk to me again after multiple attempts and I we’re friendly again and hopefully good friends again someday. I haven’t seen my other ex business partner in over a year now. I’ve reached out on multiple occasions, but no luck. I also don’t get invited to much of anything anymore which he’s invited too, since he was a better friend with most of our mutual friends.

We each invested 23k in December 2015 and after a very strongly appreciating market plus many hours we each netted 120k plus our investment back. Landfall win investing wise, but it didn’t save the friendship.

If you can do it alone, don’t partner up is my thought.

Thanks so much for the input, I actually brought your story back to my buddies as an example of what can happen and asked them how they would handle this scenario. 

There are a lot of valid points here.  I just want to say that it is not ALWAYS a bad idea, but there needs to be value brought to the table from all parties. 

Our business was started by myself and my brother and we have continued to grow it together, successfully.  Our 3rd brother wanted to join in but didn't know a thing about real estate and as a result had nothing to bring to the table.  

Our recommendation to him was to learn, learn, learn and come back with some value to bring to the company.  He now does our marketing and SEO and is working his way into an even partnership.  

My advice would be to hold them accountable and force them to grow before seeing the fruits of the labor.  Make them learn a skill, learn real estate, do something that provides long term value to the business.  The worst thing for a business is if one person feels they are doing the work of the other partner(s).  

It may not be ideal or work for many, but it is possible when done the right way.