Successful Partnership Strategies

[Michael Austin]

Hello BP family!  Happy New Year!

I'm hoping to get some examples of successful (or not so successful) partnership strategies you have loved or regretted, with either single family buy and holds (BRRRR's), or flips. I am still looking to land my first deal, and i have recently approached a close friend that is looking to get a property via HML. We've talked and both see how partnering could be mutually beneficial.

We shake out like this:  I have more cash than time, and he has time and credit, less liquid, and some experience

I've heard and read about everything from equity stakes, to flat percentages, to 50/50 splits.  

I think the crux of my concern is that i would prefer to buy and hold and repeat, but I get the impression he and his wife are concerned about being able to make a clean/concise split at the end of the "sale" which would require a flip.  I'm not opposed to a flip, but I like the idea of residual income.  A flip could be an eventual means to that end, who knows.

Back to my original request - how are your partnerships structured?  The good, the bad, and the ugly

Thank you in advance, Mike

"It isn't the mountains ahead to climb that wear you out; it's the pebble in your shoe." - Muhammad Ali 

[Kenneth Garrett]

@Michael Austin

Partnerships need full disclosure.  You need to spell out in your operating agreement what each partners role is and what each will be providing.  I have included below our responsibilities.  Hope this helps.

Partner 1

50% Ownership

Select Project

Agree to Price of Offer and Other Conditions Submit Offer to Broker

Agree to Rehab Plan and Schedule Prepare Funding Opportunity Document Solicit Investors for Funding

Coordinate Funding for the Project

Coordinate Documents with Attorney for Funding Coordinate with Attorney Closing Dates and Fees Coordinate with Real Estate Broker on Details

Secure Property Insurance and have Utilities Activated Secure Bank Account to Pay Bills

Payments over $500 Require Approval of Both Owners Prepare On-Line Advertising for Property Available for Rent Upon Selection of Tenant Run Criminal and Credit Check Agree to Rent Amount and Security Deposit

Provide Updates to our Private Investors as to Progress of Project and Coordinate with the Bank on the Refinance

Request Appraisal as soon as Practical

Provide Personal/Business Credit to Secure Refinance 

Close on Refinance Within Scheduled Time

Exit Strategy

Partner 2 

50% Ownership

Select Projects

Agree to Price of Offer and Other Conditions Develop Plan for Rehab

Develop Construction Schedule 

Develop Budget for Rehab Coordinate with Outside Contractors Initiate and Complete Rehab

Labor will be at cost as part of Participation to Operating Agreement Agree to Terms on Funding Conditions i.e., Interest Rate etc

Coordinate Permits if Applicable with Government Entity

Schedule Inspections and Remedy Compliance

Secure Certificate of Occupancy or Final Inspection Approval Both Members will Agree to Pay Bills

Payments over $500 Require Approval of Both Owners Coordinate Showing Property to Prospective Tenants 

Select Prospective Tenants and Recommend to Member 

Agree to Rent Amount and Security Deposit

Clean Up Property for Tenant

Provide Property Management and Maintenance 

Provide Personal/Business Credit to Secure Financing Exit Strategy