My new Real estate partnership

[Drawingdead]

One of my best friends and I started a real estate partnership.

He is a Jack of all trades can completely renovate a house from the bottom up for dirt cheap. He also owns 7 properties already, the problem is he’s not broke at all but he’s cash poor. He just doesn’t have a lot in his savings and he’s not going to refi a property at current rates from 3%.

I on the other hand have access to about 100k in stock investments but I’m not nearly as good at Reno houses not have I ever owned a rental property. I’m putting up 25k to buy our first two unit, he’s putting up maybe 5k.

I’m trying to figure out a fair partnership for this kind of set up where I’m bringing a fair amount of money to the group but he’s bringing many skills then I have. We tossed the idea of buying a fixer upper,(which he just renovated an 3 unit) and refinancing so I can get my money back which I would roll over into another unit.

I would appreciate any advice.

[Dan Druff]

My advice would be to wait on this.

It appears we might be on the verge of another 2008. The real estate market is very shaky right now, after years of appreciation. Some of the appreciation was artificially spurred by COVID and the financial support people were getting from the gubbmint. (Vacation homes also went WAY up in value, as people suddenly saw the need for owning a resort home they could use when everything else was shut down.)

If you do this partnership as stated, you should make it based upon the financial amount you are putting into it, versus him, and then come up with some sort of payment to him each time he renovates a property. If you wish to avoid determining this each time, you can also give up a few percentage points to him, but don't make it that much, or you're getting screwed. Handymen are useful to have in a real estate operation, but they are not particularly expensive nor hard to find. The person with the capital to invest is the most valuable, the person who is best at finding actual "deals" is second most valuable, and the handy person is the distant third.

Furthermore, while this is unrelated to the partnership, you should find a way to check the credit of applicants. There are services which do this, but it might be too expensive for you if you only own 2 units. At the very least, you should have applicants check their own credit and send you the full report. Do not rent to people blind, or otherwise it's a recipe for getting fucked and going through an absolute hassle. Tenant quality is huge when it comes to the ability to run small rental businesses properly and as hassle-free as possible. Also, make sure you take pictures of the unit before renting it (during the walkthrough with the tenant), take an adequate security deposit, and have them sign to the condition of the unit when they take it. Very important to cover yourself.

There is a lot of confusion in the general public regarding landlords and tenants. Some believe landlords are greedy assholes who always screw people. That's definitely true of some landlords, but it's also true that many tenants are deadbeats, scammers, or simply won't take responsibility for damage they caused. There are a lot of shitty people on both sides, so don't be one of them, and avoid dealing with people who appear to be shitty.

GL

[4BET]

What state are you in where a 2 unit is 30k or is that just down payment?

[Drawingdead]

What state are you in where a 2 unit is 30k or is that just down payment?

Just a down payment

[Drawingdead]

My advice would be to wait on this.

It appears we might be on the verge of another 2008. The real estate market is very shaky right now, after years of appreciation. Some of the appreciation was artificially spurred by COVID and the financial support people were getting from the gubbmint. (Vacation homes also went WAY up in value, as people suddenly saw the need for owning a resort home they could use when everything else was shut down.)

If you do this partnership as stated, you should make it based upon the financial amount you are putting into it, versus him, and then come up with some sort of payment to him each time he renovates a property. If you wish to avoid determining this each time, you can also give up a few percentage points to him, but don't make it that much, or you're getting screwed. Handymen are useful to have in a real estate operation, but they are not particularly expensive nor hard to find. The person with the capital to invest is the most valuable, the person who is best at finding actual "deals" is second most valuable, and the handy person is the distant third.

Furthermore, while this is unrelated to the partnership, you should find a way to check the credit of applicants. There are services which do this, but it might be too expensive for you if you only own 2 units. At the very least, you should have applicants check their own credit and send you the full report. Do not rent to people blind, or otherwise it's a recipe for getting fucked and going through an absolute hassle. Tenant quality is huge when it comes to the ability to run small rental businesses properly and as hassle-free as possible. Also, make sure you take pictures of the unit before renting it (during the walkthrough with the tenant), take an adequate security deposit, and have them sign to the condition of the unit when they take it. Very important to cover yourself.

There is a lot of confusion in the general public regarding landlords and tenants. Some believe landlords are greedy assholes who always screw people. That's definitely true of some landlords, but it's also true that many tenants are deadbeats, scammers, or simply won't take responsibility for damage they caused. There are a lot of shitty people on both sides, so don't be one of them, and avoid dealing with people who appear to be shitty.

GL

Thank you I will take everything you said into consideration

[4BET]

I disagree with Druff about another 2008, The market is softening but no 2008 is coming

Prices have gotten way to high so we sold a few dumps that we were in the process of rebuilding and said F it will relax for awhile. As we have rental income.

When everyone stops buying that’s when you jump in,best prices more negotiation power etc

So I agree wait but not to long. Our plan is to buy 2-3 more dumps to rebuild early next year

Really you need to know the market, If you see a great buy jump on it, I still look everyday

So even though we are waiting for things to pull back a bit not afraid to buy today if the right deal came along

I know this don’t touch on your partnership but I will post later how we got started

[Drawingdead]

things are still selling in S.East WI. Everyone is moving from Illinois to Wisconsin to avoid taxes. Our houses are still selling in a short time even with high rates.

Ill property taxes are 6-15k on a house. My 230k house has a property tax of 2900. Like AZ is growing because everyone is leaving CA.


These kinds of issues are why I’ve started a partnership with my friend who’s already in the business. I have seen a few places dropped 10/15k already but they’re in terrible areas so I wouldn’t consider one of those

[4BET]

In 2015 we bought our house in central Florida. My better half had a booming eBay business and I was playing cash games at a small card room here and sometimes Tampa

We invited my sister up from the keys for Easter, We were talking and I told her I was gonna buy a house to flip because honestly it was getting boring just playing cards and the games are smaller then I wanted to play,Would rather play a couple days a week max.

My sister immediately said I want in when I said I was gonna flip a house,I never wanted a partner really but didn’t have a problem with my sister making some money off us fixing up places

So I few weeks later I found a house online that had been stuck by lightning, Caught fire and fire department did a lot of damage. 2/1 860 SF block home on .33 acre lot for 33,000.

So I called my sister and told her I am going to look at this house and if I like it gonna buy. I told her if she wants in she can pay for the house cash and I will fix it up and pay for all materials and labor costs.

So I went and looked at it and made a deal 27,000 cash. My sister paid 27k, I rebuilt what I could hired company’s for other stuff. Cost me right about 20,000 took about 8 weeks. Sold for 89,900 she took her 27k I took my 20k we spilt the rest

Now she got the best of the deal as I was there everyday running the job and she was in the keys but I didn’t care she is my sister and I was happy she made some money also. Then we want on to the next one, My sister never got involved with the rentals.

So maybe you can buy the place he can fix and buy material. Then split profit

Biggest thing I never wanted a rental if I couldn’t buy cash, When the rent comes in I don’t want to give it to the bank but I was able to buy places cheap then

My advice would be flip some houses, Then use the profit to buy rentals cash, No bank loan, no hard money loans , I invested every dollar I made flipping into buying rentals cash and always bought dumps so I could get them cheap and rebuild

[4BET]

BTW I guess to Druff point about the market not being great. I do agree market isn’t great but I see much less of a down turn then 2008.

I wouldn’t buy a flip here in Florida in this market but we are looking for places to rent not sell

[Drawingdead]

BTW I guess to Druff point about the market not being great. I do agree market isn’t great but I see much less of a down turn then 2008.

I wouldn’t buy a flip here in Florida in this market but we are looking for places to rent not sell

Thanks for the suggestions, maybe I gave the wrong impression. We’re not buying our house tomorrow. We’re waiting for a great deal in a good area. If we don’t own a house by July I’m okay with that lol in no rush. I have to pay for my daughters wedding in may anyways lol, but if a deal comes along for 90/100k 2 or 3 unit building, I want to be able to jump on it without to much lag time.

I really don’t want to flip at the moment, I want a long term thing. I know having a mortgage on a rental is not ideal but my overall plan is, buy our first house together and wait a year. If I’m enjoying the process and things are going well between Jason and I, then I want to buy two more totaling 6 units by year 3 and 4. Eventually if we can make 1.5/2k a month each, I would just use that money to pay off the first lowest priced rental and snowball from there.

Jason works for two of our friends who started the same process in 2012 and now they manage 250 rentals which Jason is the property manager.(guy in charge of all the maintenance workers) and they own 10 or 15 rentals themselves. Granted they have property management aspect which I don’t want but I know it can be done. I don’t want to work with them though because they refinance and take every penny out of their properties in tax free money. I personally do t like the risk doing that, Jason agrees with me and that’s not how we’re going to run our business. Slower growth but more stable cash flow and lots of flexibility.

Obviously this is real life, shit happens the market changes, things don’t go as planned but it’s my over all plan. I’ll still be working and making a pretty good income, Im 36 and have 15 years left till I retire, this is the start of my retirement plan.

I think our plan is I’m going to take 20% of net profits off the top to begin repaying my 25k and do that until I’m fully repaid which is years down the road but I’m going to see an accountant about the business borrowing money from me and paying me back with interest.

[garrett]

I think if what i skimmed is corrrect Druffs is right

People are realighning their own portfolios and probably Post Covid now clearly HIGH inflation times and maybe just less Cryptocurrency Exposure at alll even by massive Corprations, who may htink lets go another direction here for some years now. So profitability in Real Estat in 2022 now is NOT what it was in 2020 that is right.

Buy the DIP sell the TOP (in theory)

and with interest Rates Federally again just hiked UP that will reduce long term (Mortgage) borrowers since Debt is now going to cost you more to pay back over 10 or 20 or 30 years, so that interest Rate matters there over much time. Right now Crypto is what is probably a DIP but i dont recomend anything i have fun speak casual here too but glgl

[garrett]

Now having said that above its all individual of course and so to a few irrelevant anyway, just long term no ones trying to lose. In any investment or home too so i get that and wish you best. Right now Real Estate plus Interest Rates in America once again just went up (plus High inflation) means people have less of their own disposable incomes. So when faced with struggle survival comes first, thats Food Water Shelter. Not your fancy nice pretty stuff so that's how human choice goes instinctually left to survival, first is food shelter water.

[4BET]

BTW I guess to Druff point about the market not being great. I do agree market isn’t great but I see much less of a down turn then 2008.

I wouldn’t buy a flip here in Florida in this market but we are looking for places to rent not sell

Thanks for the suggestions, maybe I gave the wrong impression. We’re not buying our house tomorrow. We’re waiting for a great deal in a good area. If we don’t own a house by July I’m okay with that lol in no rush. I have to pay for my daughters wedding in may anyways lol, but if a deal comes along for 90/100k 2 or 3 unit building, I want to be able to jump on it without to much lag time.

I really don’t want to flip at the moment, I want a long term thing. I know having a mortgage on a rental is not ideal but my overall plan is, buy our first house together and wait a year. If I’m enjoying the process and things are going well between Jason and I, then I want to buy two more totaling 6 units by year 3 and 4. Eventually if we can make 1.5/2k a month each, I would just use that money to pay off the first lowest priced rental and snowball from there.

Jason works for two of our friends who started the same process in 2012 and now they manage 250 rentals which Jason is the property manager.(guy in charge of all the maintenance workers) and they own 10 or 15 rentals themselves. Granted they have property management aspect which I don’t want but I know it can be done. I don’t want to work with them though because they refinance and take every penny out of their properties in tax free money. I personally do t like the risk doing that, Jason agrees with me and that’s not how we’re going to run our business. Slower growth but more stable cash flow and lots of flexibility.

Obviously this is real life, shit happens the market changes, things don’t go as planned but it’s my over all plan. I’ll still be working and making a pretty good income, Im 36 and have 15 years left till I retire, this is the start of my retirement plan.

I think our plan is I’m going to take 20% of net profits off the top to begin repaying my 25k and do that until I’m fully repaid which is years down the road but I’m going to see an accountant about the business borrowing money from me and paying me back with interest.

Sounds like you have a good plan put together.

I know alot (most) investor’s use the banks, Hard money loans to build a nice portfolio, Nothing wrong with that.

Personally I never wanted to incur debt on rentals but that being said I was able to find cheap cheap property’s and not in the ghetto,Probably not available in other parts of the country.

A guy from California bought 3 brand homes right by where I live about 280k each with mortgage’s 3/2 1300ish SF. Now he is trying to rent them 1700 a month. Very hard to get that much rent here.

After he pays everything no money left, He rented one tenant left after 4mo now back for rent. No thanks not putting my neck out buying rentals.

The way we built up we are not exposed to high interest rates high home prices etc. Our tenants have jobs and pay on time that’s all that matters to us.

All that being said I get it if you need to use mortgage loan, Hard money loans to get started that’s fine, Sounds like the partners have experience so that’s great.

My advice would be pay off the loans as soon as you build up were you want to be. You are still young so time is on your side. Best of luck

[sonatine]

real estate bull thesis based on the incumbent fannie mae / freddie mac relaxed restrictions for synthetic jumbo loans.

full writeup here:

https://bit.ly/3ULOhVc

[Drawingdead]

Thanks for the suggestions, maybe I gave the wrong impression. We’re not buying our house tomorrow. We’re waiting for a great deal in a good area. If we don’t own a house by July I’m okay with that lol in no rush. I have to pay for my daughters wedding in may anyways lol, but if a deal comes along for 90/100k 2 or 3 unit building, I want to be able to jump on it without to much lag time.

I really don’t want to flip at the moment, I want a long term thing. I know having a mortgage on a rental is not ideal but my overall plan is, buy our first house together and wait a year. If I’m enjoying the process and things are going well between Jason and I, then I want to buy two more totaling 6 units by year 3 and 4. Eventually if we can make 1.5/2k a month each, I would just use that money to pay off the first lowest priced rental and snowball from there.

Jason works for two of our friends who started the same process in 2012 and now they manage 250 rentals which Jason is the property manager.(guy in charge of all the maintenance workers) and they own 10 or 15 rentals themselves. Granted they have property management aspect which I don’t want but I know it can be done. I don’t want to work with them though because they refinance and take every penny out of their properties in tax free money. I personally do t like the risk doing that, Jason agrees with me and that’s not how we’re going to run our business. Slower growth but more stable cash flow and lots of flexibility.

Obviously this is real life, shit happens the market changes, things don’t go as planned but it’s my over all plan. I’ll still be working and making a pretty good income, Im 36 and have 15 years left till I retire, this is the start of my retirement plan.

I think our plan is I’m going to take 20% of net profits off the top to begin repaying my 25k and do that until I’m fully repaid which is years down the road but I’m going to see an accountant about the business borrowing money from me and paying me back with interest.

Sounds like you have a good plan put together.

I know alot (most) investor’s use the banks, Hard money loans to build a nice portfolio, Nothing wrong with that.

Personally I never wanted to incur debt on rentals but that being said I was able to find cheap cheap property’s and not in the ghetto,Probably not available in other parts of the country.

A guy from California bought 3 brand homes right by where I live about 280k each with mortgage’s 3/2 1300ish SF. Now he is trying to rent them 1700 a month. Very hard to get that much rent here.

After he pays everything no money left, He rented one tenant left after 4mo now back for rent. No thanks not putting my neck out buying rentals.

The way we built up we are not exposed to high interest rates high home prices etc. Our tenants have jobs and pay on time that’s all that matters to us.

All that being said I get it if you need to use mortgage loan, Hard money loans to get started that’s fine, Sounds like the partners have experience so that’s great.

My advice would be pay off the loans as soon as you build up were you want to be. You are still young so time is on your side. Best of luck

Thanks man, I was just at my buddies new property talking our set up and the contract. He got 2 flat, 3 bed rooms each, 1 bath. 100k but 17k in materials to fix them up, just appraised this week at 175k. He’s renting the top unit for 1350 and the bottom for 1150. On a 100k mortgage that’s a decent return he was saying almost 1200 a month with a loan. That’s the deals I’m trying to find lol

I agree that paying them off early is the way to go. I wouldn’t want a million in loans to my name, makes me nervous thinking about it. I do think buying 6/7 units and cash flowing the lowest mortgage rental, then compounding to the second highest mortgage and so on is the best way to go in my situation.

[Drawingdead]

real estate bull thesis based on the incumbent fannie mae / freddie mac relaxed restrictions for synthetic jumbo loans.

full writeup here:

https://bit.ly/3ULOhVc

I seen that stat last week that a lot of people are underwater. I do believe it’s going to get worse. Almost everyone I know sold or refinanced their house and pulled crazy money out. I’m talking 100-200k and bought these massive houses. To be honest I wanted to do the same thing but my house is renovated, we make a great living about 200k year and have a 900$ month mortgage. So every time I looked at a house I couldn’t bring myself to go from 15 year, mortgage at 2.5% to a 2800$/2500$ a month 30 mortgage. Maybe I missed out or maybe I made the right decision, time will tell.

[Drawingdead]

I think if what i skimmed is corrrect Druffs is right

People are realighning their own portfolios and probably Post Covid now clearly HIGH inflation times and maybe just less Cryptocurrency Exposure at alll even by massive Corprations, who may htink lets go another direction here for some years now. So profitability in Real Estat in 2022 now is NOT what it was in 2020 that is right.

Buy the DIP sell the TOP (in theory)

and with interest Rates Federally again just hiked UP that will reduce long term (Mortgage) borrowers since Debt is now going to cost you more to pay back over 10 or 20 or 30 years, so that interest Rate matters there over much time. Right now Crypto is what is probably a DIP but i dont recomend anything i have fun speak casual here too but glgl

I left crypto after it came out my “assets” were not assets and we’re not held separately like a stock account. If Coinbase goes under your inline with all the other creditors, wtf. They’re holding your money and to me that means they spent the money on something else. I thought a publicly traded company would be run more in line with sec rules for stocks, separate accounts for assets and business purposes. I guess not.

[sonatine]

real estate bull thesis based on the incumbent fannie mae / freddie mac relaxed restrictions for synthetic jumbo loans.

full writeup here:

https://bit.ly/3ULOhVc

I seen that stat last week that a lot of people are underwater. I do believe it’s going to get worse. Almost everyone I know sold or refinanced their house and pulled crazy money out. I’m talking 100-200k and bought these massive houses. To be honest I wanted to do the same thing but my house is renovated, we make a great living about 200k year and have a 900$ month mortgage. So every time I looked at a house I couldn’t bring myself to go from 15 year, mortgage at 2.5% to a 2800$/2500$ a month 30 mortgage. Maybe I missed out or maybe I made the right decision, time will tell.

so we're clear, im not saying your wrong and to my knowledge, no one else is. but something thats becoming increasingly true is that there are geographical markets that are more vulnerable than others.

i would never tell someone to invest if youre 3 hours from a major coastal airport. but if youre near a tech hub and feeling froggy, imo there might be equity there. because short of a working class socialist revolution, the poor are getting fucked and everyone else is going to have the opportunity to buy million dollar houses, providing they are comfortable with taking on debt commitments every previous generation would have considered unimaginable.

probably a good time to invest in onlyfans. and short all markets linked to home equity liquidity in every fly over state until the seas rise enough to make them coastal properties.

[Sanlmar]

My advice would be to wait on this.

It appears we might be on the verge of another 2008. The real estate market is very shaky right now, after years of appreciation

you want to look back at history to find a period that is most similar to today so that we can gather clues about what we can experience in a extended period of inflation and recession.

We are not experiencing a redux of 2008. That is a difficult period that just happens to be convenient to short term memory. We are experiencing something more similar the 1970’s.

We are going to battle hard to preserve our wealth that ordinarily would be growing smaller because of inflation (& compounding effects of inflation).

Real estate and especially rental real estate did very well during the ‘70’s

We can find some charts from on Fred Economic Data later when we aren’t drinking.

Love hearing the boots on street stories.

I took offense at the “maintenance and construction is a throw away” item in the hierarchy of assets brought to bear in real estate.

I need to learn to grout and not fuxt it up. Never done it and I’m not giving income to someone else. Margin is everything.

Tommy Vu was right

[sonatine]

My advice would be to wait on this.

It appears we might be on the verge of another 2008. The real estate market is very shaky right now, after years of appreciation

you want to look back at history to find a period that is most similar to today so that we can gather clues about what we can experience in a extended period of inflation and recession.

We are not experiencing a redux of 2008. That is a difficult period that just happens to be convenient to short term memory. We are experiencing something more similar the 1970’s.

We are going to battle hard to preserve our wealth that ordinarily would be growing smaller because of inflation (& compounding effects of inflation).

Real estate and especially rental real estate did very well during the ‘70’s

We can find some charts from on Fred Economic Data later when we aren’t drinking.

Love hearing the boots on street stories.

I took offense at the “maintenance and construction is a throw away” item in the hierarchy of assets brought to bear in real estate.

I need to learn to grout and not fuxt it up. Never done it and I’m not giving income to someone else. Margin is everything.

Tommy Vu was right

this rings true to me tbh.

whats interesting is the hallmark 70s dystopia vibe was being forced to wait hours in gas lines. that was the stinger for a lot of people; there was no remote work, there were no EVs.

but again i think that this bull element is going to be very localized to areas that can support it, and those areas are going to directly benefit from people spending their home equity. and everywhere else in between the coasts is in for some mad max shit.

again, ironic, considering the los retardos aversion to socialism; nothing but robot tax funded UBI is going to save them. which they will vote down. lol. lmao.