Partnering for BRRRR

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Partnering for BRRRR

Michael Coco
Attorney · Princeton, NJ · Member since 2021 · 39 posts · 15 votes

Hi, I'm currently trying to start my real estate journey. I have a loan pre-approval and "some" money for a down payment (though my loan costs would be lower if I had more). I know having a mentor is good (accepting applications!). However, I do want to "go in" with at least one other person (maybe two). Ideally, the person would be handy, local, help contribute financially, and have the same basic investing goals. I would form an LLC for this, and I'm pretty good with corporate law so I would address common problems up front (what happens if one person quits, wants to retire, we disagree on something, etc.). I went to a few meet-ups pre-covid and found lots of people offering services, but not so many looking to start investing. So, two questions for the board: 1) what problems are there when you're working with a partner or partners that I might not have thought about specific to real estate; and 2) any recommendations on places to find other interested people? Thanks!

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Randall AlanPro Member
Investor · Lakeland, FL · Member since 2017 · 1k+ posts · 1k+ votes
3y
Quote from @Michael Coco:

Hi, I'm currently trying to start my real estate journey. I have a loan pre-approval and "some" money for a down payment (though my loan costs would be lower if I had more). I know having a mentor is good (accepting applications!). However, I do want to "go in" with at least one other person (maybe two). Ideally, the person would be handy, local, help contribute financially, and have the same basic investing goals. I would form an LLC for this, and I'm pretty good with corporate law so I would address common problems up front (what happens if one person quits, wants to retire, we disagree on something, etc.). I went to a few meet-ups pre-covid and found lots of people offering services, but not so many looking to start investing. So, two questions for the board: 1) what problems are there when you're working with a partner or partners that I might not have thought about specific to real estate; and 2) any recommendations on places to find other interested people? Thanks!

@Michael Coco

 Points of contention would probably be around each individual’s contribution.  What happens when you (say the motivated one) does 80% of the work - (even if it is just leg work) and the others do little to none?  

What happens when more money is needed and not everyone wants to continue to throw money at the problem?

What happens when there is a disagreement as to renovation level… one person wants higher end, the others don’t? 

How do you determine value mid-stream if someone is exiting early? 

Don’t forget about carrying costs… property taxes, insurance, utilities, etc as ongoing expenses. 

A partner that is not a spouse can definitely be more of a challenge.  Disagreements about almost anything are possible… like “who chose the crappy contractor?” After you figure out he is crappy, walks off the job, etc?  

My personal suggestion: figure out how to go it alone.  No one will care more than you, and you will seldom run into disagreements (with yourself😜) when it is just you making the decisions.

Otherwise, you might look for investors that are just in it for the return on investment (silent partner) where you get to control the direction entirely… it would simplify a lot of those potential challenges.  

But overall, an operational partner where both are active in the decision making can be a rough go if either are strongly opinionated.

All the best!

Randy 

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  • Randall AlanPro Member
    Investor · Lakeland, FL · Member since 2017 · 1k+ posts · 1k+ votes
    3y
    Quote from @Michael Coco:

    Hi, I'm currently trying to start my real estate journey. I have a loan pre-approval and "some" money for a down payment (though my loan costs would be lower if I had more). I know having a mentor is good (accepting applications!). However, I do want to "go in" with at least one other person (maybe two). Ideally, the person would be handy, local, help contribute financially, and have the same basic investing goals. I would form an LLC for this, and I'm pretty good with corporate law so I would address common problems up front (what happens if one person quits, wants to retire, we disagree on something, etc.). I went to a few meet-ups pre-covid and found lots of people offering services, but not so many looking to start investing. So, two questions for the board: 1) what problems are there when you're working with a partner or partners that I might not have thought about specific to real estate; and 2) any recommendations on places to find other interested people? Thanks!

    @Michael Coco

     Points of contention would probably be around each individual’s contribution.  What happens when you (say the motivated one) does 80% of the work - (even if it is just leg work) and the others do little to none?  

    What happens when more money is needed and not everyone wants to continue to throw money at the problem?

    What happens when there is a disagreement as to renovation level… one person wants higher end, the others don’t? 

    How do you determine value mid-stream if someone is exiting early? 

    Don’t forget about carrying costs… property taxes, insurance, utilities, etc as ongoing expenses. 

    A partner that is not a spouse can definitely be more of a challenge.  Disagreements about almost anything are possible… like “who chose the crappy contractor?” After you figure out he is crappy, walks off the job, etc?  

    My personal suggestion: figure out how to go it alone.  No one will care more than you, and you will seldom run into disagreements (with yourself😜) when it is just you making the decisions.

    Otherwise, you might look for investors that are just in it for the return on investment (silent partner) where you get to control the direction entirely… it would simplify a lot of those potential challenges.  

    But overall, an operational partner where both are active in the decision making can be a rough go if either are strongly opinionated.

    All the best!

    Randy 

    2Reply
  • Brandon Rabe
    Rental Property Investor · Honolulu, HI · Member since 2019 · 179 posts · 91 votes
    3y
    Quote from @Michael Coco:

    Hi, I'm currently trying to start my real estate journey. I have a loan pre-approval and "some" money for a down payment (though my loan costs would be lower if I had more). I know having a mentor is good (accepting applications!). However, I do want to "go in" with at least one other person (maybe two). Ideally, the person would be handy, local, help contribute financially, and have the same basic investing goals. I would form an LLC for this, and I'm pretty good with corporate law so I would address common problems up front (what happens if one person quits, wants to retire, we disagree on something, etc.). I went to a few meet-ups pre-covid and found lots of people offering services, but not so many looking to start investing. So, two questions for the board: 1) what problems are there when you're working with a partner or partners that I might not have thought about specific to real estate; and 2) any recommendations on places to find other interested people? Thanks!


     Hey Michael I might be able to support you. Are you looking just at Princeton or have you looked at other markets?

    1Reply
  • Mark MunsonBusiness Member
    Lender · Orlando, FL · Member since 2022 · 440 posts · 300 votes
    3y

    Hi @Michael Coco

         I'd be happy to give you some feedback on JVing or anything else as you get started. Going to REIAs is a good start. See if they have a new investor sub-group and go from there. Network as much as possible at this stage. I work with new investors all over the country and frequently speak in front of groups of new investors, so I can't stress enough about networking. As far as partnerships go, just make sure you know the logistics of the divorce before you get married. Feel free to reach out and best of luck!

    [email protected]407-900-8799
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    1Reply
  • Michael Coco
    OP
    Attorney · Princeton, NJ · Member since 2021 · 39 posts · 15 votes
    3y
    Quote from @Brandon Rabe:
    Quote from @Michael Coco:

    Hi, I'm currently trying to start my real estate journey. I have a loan pre-approval and "some" money for a down payment (though my loan costs would be lower if I had more). I know having a mentor is good (accepting applications!). However, I do want to "go in" with at least one other person (maybe two). Ideally, the person would be handy, local, help contribute financially, and have the same basic investing goals. I would form an LLC for this, and I'm pretty good with corporate law so I would address common problems up front (what happens if one person quits, wants to retire, we disagree on something, etc.). I went to a few meet-ups pre-covid and found lots of people offering services, but not so many looking to start investing. So, two questions for the board: 1) what problems are there when you're working with a partner or partners that I might not have thought about specific to real estate; and 2) any recommendations on places to find other interested people? Thanks!


     Hey Michael I might be able to support you. Are you looking just at Princeton or have you looked at other markets?


     I'm looking locally, around central New Jersey. 

    0Reply
  • Vanessa Ivonne Hernandez
    Lender · Jersey City, NJ · Member since 2020 · 101 posts · 43 votes
    3y

    I use the meetup app to find nearby networking groups with other real estate professionals and investors. You search by your interest and location, and you're all set. 

    I joined 3 groups in NJ. (DM me if you want my thoughts)

    Good luck on your investment journey!

    0Reply
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