Is partnering to cash buy, flip and sell, repeat a good strategy?

[Huzaifa Ahmad]

New to real estate investing and trying to avoid using leverage/loans involving interest due to religious reasons. My wife and I have another married couple friends in the same boat and we thought let's partner and pool money to cash buy and then flip a house, start off cheap like a $100,000 house, flip and sell and use profits to buy a $200,000 house, repeat and rinse until we can afford a 4 unit multifamily to rent out. Ultimately goal is to generate passive income through cash flowing properties without using interest loans. Does this seem reasonable or is there a better strategy with creative financing that does not depend on loans? Thanks!

[David Constant]

Welcome to the BP community :)

My 2 cents on this: it seems like partnering up with your friends will allow you to invest more quickly than if you wait and save the money yourself. If this is true, I would definitely encourage you to do so. Any time you go into a financial endeavor with friends (or anyone else for that matter), you want to keep a few things in mind:

-I'd recommend connecting with a lawyer and forming an LLC. When you introduce money to the equation, it's important to protect everyone's interest (financial and otherwise). By forming an LLC with a lawyer - and by getting clear on roles, responsibilities, voting, etc. - everyone will be on the same page when it comes to decision-making. You want to guard against a scenario where you find a deal but your friends say no because they're in charge of the money.

-outline the process beforehand, to the greatest extent possible. While you may have to consider changing course midstream, have a plan of attack before you launch into this partnership. For example, are you searching for SFHs, multi-families, short-term rentals, etc.? Do you have a contractor connection? Who is your attorney? Lender? Real estate agent? Building the team in advance and having a clear goal and making sure all partners are in support is crucial.

Just a couple of initial thoughts - DM me if you want to talk more!