Do you need a company name ?

Question

Jon Holdman · Answer

Don't fall into the newbie trap of thinking entities and business cards are important.  You may want to do them, but the focus of your efforts must be on doing deals.

If three of you are involved you are forming a partnership.  The MOST IMPORTANT thing for you to do as a group is come up with an operating agreement.  If you don't spend hours working on this document that might be 10 pages or more, you've not thought about it enough.  You should assume that at some point in the future the three of you will be in court fighting lawsuits each of you has filed against the others.  Hopefully that never happens, but if you cannot take that mindset right now (while you are on speaking terms) and discuss, agree upon, and write down what you will do if that happens your partnership is doomed.  Disagreements and problems will come up and the operating agreement is what you will refer to to resolve those problems.  With three of you you probably want to discuss this with an attorney.

You will probably want to form two entities.  One with be an LLC.  Use this for the buy and hold properties.   The other is either an s-corp or an LLC that elects to be taxed as an s-corp.  Use this for the fix and flips.  Actually creating the entities is done by the NJ secretary of state.  Many states have this process online.  You do not need to pay for an attorney to do this, if you can do it yourself.  Spend your attorney money on the operating agreements.

Discuss tax issues with your accountant.  If you don't have one, find one.  The two entities will need to file tax returns and create K-1 statements that are given to each of the three of you that each of you will then use to prepare their own taxes.

Mark Langdon · Answer

I would skip the partnership and go it alone since your ideas differ. I would continue to read up here on BP on topics such as "Buying your first Buy and Hold Property" Plenty of good stuff here that tells you what you need to get started and what to think about. You need to educate yourself so your first deal is not a flop and decide what type of property you would be buying (Single vs. Multi); How will you get financing ; Will you buy a Multi and live in one half and rent the other half to build equity; what area do you want to do this; do you want to be a landlord or use a property manager and most important learn how to do the numbers so you buy right.

But at the same time the only way you learn is by doing deals but sounds like you need to do some soul searching a little more so you have a plan. Make a plan; Work the Plan. Put that new Pro Membership to good use.

Click on this:Ultimate Beginner's Guide to Real Estate Investing

http://www.biggerpockets.com/files/user/brandonatb...

Good Luck !

Hasan Hamdan · Answer

Welcome to the Real Estate investing world! @Jon Holdman is spot on with everything.

A 3 person partnership is tough, and I would not recommend it either. Focus on the deal getting, financing will come. There's a ton of investors in NJ so if you ever get a deal you cannot handle you can always JV with someone.

The 3 NJ meet-ups that are very good are NJRESN, NJREIA, NJREIC. You can usually find my partner and I there.

Taylor Howes · Answer

Jean and mark thanks for the advice! What I am going to do is continue my "soul searching" It seems like education is key #1 to get the ball rolling in this field. One of the main reason partnership even came to my mind was to help with financing. It seems like there is alternatives instead of forcing it. I have this idea/dream in my head that I imagine. I am owning like 10 properties and my farther who is a handy man (Been in construction his whole life) as my property manager which he oversees my properties as he is semi retired. Even if I have issues that I am not 100% sure how to handle he has been around the block enough times. (eventually real estate full time, thats a while from now)

I have many things to learn I am going to do some reading and get back to you guys

Thanks !

Jean Bolger · Answer

If I were in your shoes I'd really look at saving up for a downpayment and buying a duplex or triplex that you can owner occupy. You get very favorable treatment as far as loan terms (compared to a typical investment loan), you'll probably really cut down your living expenses (so you can save for the next downpayment) and you'll get hands-on experience. After a few years, move on to another one, renting out unit you used to live in. You can build a good portfolio relatively quickly if you are willing to be a "serial owner-occupant"

Taylor Howes · Answer

ok! that makes sense. I know this is going to be a question that is really open. Say you guys in my shoes what would you do first ? This point in my life im 24 I am working still at enterprise pulling in about 2300 a month working. I have not doen anything towards investing yet besides educating myself (reading books, watching videos, etc) What would be my first step into buying my first piece of real estate. I have been doing marketing, sales and service for work for 2 years now and I am great with speaking to anyone not shy at all.  Willing to take any type of advice( once again I love learning from others and are very appreciative!

THANKS ONCE AGAIN GUYS ! This really means A LOT !

Jean Bolger · Answer

Jon is right (as usual!) Buy and hold investing is not something that really is a match for partnership investing. The exceptions I could see would be 1) you are buying larger multi-families and need to pool funds to come up with a downpayment, or 2) one partner is providing all the funds as basically a silent partner  and the other has the investing expertise and is doing all the managing/ decision making. Even then, it can be hard to keep goals aligned over the long term. Flips are by definition short term, so the partnership idea works better there.

Jon Holdman · Answer

Absolutely.  Partnerships are complicated and bring a BUNCH of issues to the table.  If you have different goals, you really want to invest on your own.

Creating an LLC makes handling the partnership easier, but is not essential.  In fact, you don't need to do anything to create a partnership.  Just do business as a group and you have a partnership. You still need the operating agreement, though.  That's how you resolve the inevitable conflicts.

Didn't mean to imply that was for asset protection, though it may offer some.  Yes, get an umbrella policy.  You really want to discuss asset protection with an attorney and set up things appropriately for your risks and assets.

Taylor Howes · Answer

you guys are great thank you so much ! Few questions I have off these responses. The reason we are planning to go partners is because we have similar goals of being financially free after a few years of investing. All three of us are the same age and worked at same company (enterprise). Long term we have different views. I want to build a portfolio for investing in homes to rent for a monthly Income over many years. The other two really want to flip houses and have a aggressive plan ( I would still do flips if the deal is a good investment). Myself  I am very proactive I love learning and taking advice, the only issue to start is I don't have much money saved to invest and credit is not perfect but it middle score is about 660. Do you guys think I should just invest on my own? Also you said I should do a LLC for rental liability, would you recommend to buy a liability policy instead of LLC .

Bram Spiero · Answer

hey @Taylor Howes

The best piece of advice I heard lately about business cards is don't use them.

You are much more likely to get an interaction, response or call back from a person if you can convince them to put your name and number in their cell phone directory.

Follow that up with a short little text along the lines of "Hi, this is Taylor, now that we've talked please feel to contact me if you need anything - OK?"

Getting a response to that OK is key. Now they'll remember you instead of sticking that card in their pocket.

What's more, motivated sellers often want to sell to someone they can relate to. Being less sleek by not having a card with a logo ready might help cultivate that image in their mind. Just get them to put your name and number in their phone.

Investors wont care about your card if your business plan is convincing and your track record is good.

And you'd better hope that the agent selling your rehabed house knows about getting his number into peoples phones instead of handing out cards.

Do you need a company name ?

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