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Updated over 10 years ago,
Partnership disparity and where to look for "deals"?
I recently began discussing business with a friend I've seen consistently for about a year in a social setting. Turns out he has tremendous business connections and significant real estate investments. I'm horrible at networking, so I've slowly nudged our conversations towards real estate investing.
I have modest personal funds at my disposal and I'm primarily interested in purchasing several rental income properties, but price is my entry barrier. My friend loosely agreed that we could partner on something if it looks good and, being about 15-20 my senior, I think we've *very* loosely evolved into somewhat of a mentor-protege relationship.
So I naively took the initiative and had a broker friend send me some MLS listings in a price range I thought would be good to start and put them all into a spreadsheet. I broke down the HOA fees, taxes, estimated repairs to get them rental ready, local comps, comparable rents, and the cap rate. I came up with a cap range of 6-10% for about ten properties. The net cashflows range from around $480-$726 (I tried to be very conservative accounting for 1 month's rent to a rental listing agent and 1 month of vacancy).
I sent these to my friend. I was hopeful he would be interested in at least a few, but more hopeful that it would display initiative and initiate a dialog so I could gauge the types of deals he likes and the information he needs to make a decision.
When he finally called me to discuss the spreadsheet he basically said he was only interested in Deals with a capital "d", not just MLS leftovers. He mentioned a cap range of around 13-20%. He also asked if I had seen any of the properties. My reply was that I wanted to gauge what he was looking for and didn't want to waste his time (or mine) if a deal didn't even look good on paper.
So now I have three main concerns. First, are my interests too disparate from my friend's to build an effective ongoing relationship? Who wouldn't like a 13-20% cap rate, but for me, something that caps at 7% and nets $480/mo would be awesome—three of those and I could literally retire! Second, I alluded to a loose agreement I have with my friend but should I firm this up and figure out what he's looking for and what we both expect out of the relationship, or should I continue to play it by ear until I find a deal we both like? Third, I work from home and my social life is pretty limited (i.e., nonexistent). I almost did a direct marketing campaign a while back when I got involved with a local REI association but never really liked the idea. Basically, my networking skills are deplorable. What is a good starting point to begin locating these "Deals" with a capital "d"? Driving for dollars seems daunting and I feel like a complete idiot.
Would really appreciate any feedback from anyone still reading. Thanks!