Use an investor group or partner up locally?

Question

I am new to BiggerPockets and Real Estate Investing but I am very excited because I think I have found what I want to do for the next 15 years!

I live in an expensive area and can't afford to buy locally. After listening to podcast number 73 with Mehran Kamari and how he partnered with a local to build his business with. I want to start buying rental properties out of state.

I have already been approached through the BP about an investor group looking in emerging markets across the country. But I think the returns would be more if I find a local partner to inspect properties for me.

I am interested in hearing the pro's and con's for someone starting out? Or what you think the best path would be for a newb. Thanks.

Mehran K. · Answer

@Brie Schmidt's advice is golden on this. Whether the person on the ground has money in the deal or not, it's important they are capable, available, and also have integrity. Your person on the ground will need to have financial incentive also. Your TK obviously does, but your partner on the ground should as well. It has to be worth their time!

Having well defined criteria on the purchase/returns you're looking for, will help a lot. If my minimum return is 30%, and I'm getting it, do I really care what the boots on the ground makes? Just food for thought!

Ryan, I got your PM, I've just had a super busy week. I'll respond soon!

Dawn Anastasi · Answer

Mehran already mentioned who he uses as his source on the ground if you listen to his podcast.  :)

Dawn Anastasi · Answer

A local individual "may" get you better returns as they probably don't have the overhead a turnkey company would.  A turnkey group probably would sell you a home already rehabbed, but you're paying a markup for that.  With an individual helping you, you could buy it needing repairs, and coordinate getting the repairs done yourself, then skip the markup.

But, the difference here is that a turnkey company is going to market themselves, so they're easier to find.  Individuals who are making killer returns may not be marketing themselves, so you have to do a bunch of networking in order to find them.  And you have to make sure you work with someone with experience and integrity.  One big incentive for someone to be on the up-and-up is their personal reputation in the investor community.

Matt R. · Answer

Welcome to BP! I really like Mehran's route. When your source on the ground has money in the deal that could add a special level of interest not available vs the other options.  The challenge is putting that together....or you could just ask Mehran who he uses.

Good luck with your search!

Brie Schmidt · Answer

@Ryan King I think it all hinges on the partner you choose.  Whether a TK company or a local investor, or an investor group.  It can really make or break you.  Finding the right person and taking the time to get to know them is imperative.

Marlon Wilson · Answer

Hi @Ryan King!

Welcome to biggerpockets!All the best on your real estate investing!

Annette Meltzer · Answer

@Ryan King

How are things going for you? Have you found someone to partner with? I am also a newbie, so cannot offer personal experience yet to a newbie, especially as a partner, but would love to hear if you have connected with someone yet. I too have considered turnkey companies, and am in the process of researching if that route is a good fit for our investment goals, whether this or that company would be a worthy partner, and being cautious until I know what and who I'm dealing with. They are strangers with a voice, photo, and website at this point, and its a hurdle to get over before (possibly) earning our trust.

I'm sure you have at received some REI's to network with here at BP to help accomplish your goals?

Ryan King · Answer

@Brie Schmidt Thank you for your response. I was under the impression that an investor group would be the safest route for a beginner and easy cash flow. I never thought of the risks even with an investor group.

@Dawn Anastasi I absolutely agree with you. I think there is risk in both but if I can find individuals with an incentive to produce, both my gains will be bigger as well as having more control with what goes into the rehab. One podcast had a great tip which was rehab the things that will double your rehab costs.

This thread has answered a lot of good questions I had. I think if I can find experienced individuals and give them an incentive to produce than I can have a little bit more control and most likely will learn more.

Now my next question is, what online resources do both investor groups and individuals use to determine emerging markets? It is imperative that I do thorough due diligence in state/location where I want to start investing. Then I can start networking for individuals to help.

Thanks to everyone.

Ryan King · Answer

Thank you! That is great advice. What about the difference in cash flow between a turnkey investor group and a local individuals?

Ali Boone · Answer

I've always gone the turnkey route, personally. There's a little extra safety in going the turnkey route over having all individual team members locally on the ground, which is incentive. Any of those individuals don't necessarily have as big as of an incentive to perform properly because what would be lost from them not working right would be minimal. Whereas a turnkey team has incentive because all the team members are tied together. If one goofs, it messes up business for the whole company.

Just something to ponder!

Use an investor group or partner up locally?

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