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Updated over 7 years ago on . Most recent reply

User Stats

8
Posts
2
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Brad Decater
  • Real Estate Agent
  • Issaquah, WA
2
Votes |
8
Posts

flip partnerships VS. long term rental partnerships

Brad Decater
  • Real Estate Agent
  • Issaquah, WA
Posted

Hello all!

My name is Brad Decater. I am new to bigger pockets and wanted to do an intro as well as ask a question to all of you experts out there! 

First off, I am very excited to be apart of this community and think it is an amazing space to learn RE investing! I am a Real Estate agent a little outside of Seattle Washington and am just starting out on my investing journey. I am a home-owner and am currently working on my first flip. I have been talking to some people who would make for a good partnership, however, I don't really know how to format a great partnership that is fair to both sides. The potential partner(s) would be providing mostly money. Although I would have some to put in as well, this is the main reason I would need them. I Don't have tons saved up and am still within my first 2 years as an agent so cant get a mortgage until I have had 2 years in the industry. 

I have a few scenarios I would love some feedback for.

1. My partner pays for the entire purchase price for a flip and rehab, and I do literally everything else. Find deal, negotiate and get into contract, close, coordinate rehab, sell myself as an agent...50%-50%  of net profit makes sense right? their money, my work. seems like a fair trade off. 

2. Partner can qualify for conventional loan and pays 20% down for a mortgage...same scenario on my side(I do everything else). Seems like at this point even though they paid the down payment, it is still significantly less than a full cash offer... Does this change the percentage that we should be sharing? considering his cash on cash return would be substantially better, but my work load is the same...any thoughts?

3. Partner pays for entire purchase price and rehab for a long term rental. I find deal, coordinate rehab and manage it. How does this partnership work? Does he get paid monthly-half of the cashflow? I really have no idea how these long term rental partnerships work. When you partner for these, who is on title? How does each partner make their money? does it change if this scenario is based on the person putting down a 20% payment as in the previous example, but for a long term rental?

I feel like you would just split the cash flow every month, then if you ever sell you pay the partner the full amount they invested, then whatever is left after that you split 50-50.

Pretty sure I am missing a lot and would love some insight on how partnerships work.

Thank you!

Brad Decater

Most Popular Reply

User Stats

8
Posts
2
Votes
Brad Decater
  • Real Estate Agent
  • Issaquah, WA
2
Votes |
8
Posts
Brad Decater
  • Real Estate Agent
  • Issaquah, WA
Replied
Originally posted by @Dustin P.:

I would start with partnering on flips and once you have built some of your own capital you can go into acquiring rentals. As @Brian Garrett said you could potentially run into issues with a long term rental with exit strategies and goals changing over time.

 Thank you @dustin posey! that is actually my exact plan. I've had a good first year in my job as a real estate agent and working on my first flip now(should list in about 3 weeks). In 2018 I want to save a good amount of capital with an outstanding year as an agent, as well as doing 4-6 flips. Then my 2 years will be up and should be able to qualify for a decent size mortgage. That being said, If a long term rental opportunity comes my way I can't pass up I may end up doing a partnership this coming year... What would be really ideal is to get seller financing though and do it on my own. Then be able to refinance out of it a year later to get traditional mortgage once I qualify again. Thanks again for your post. appreciate any advice. I am just getting started and realize I have lots to learn! 

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