Help! New to REI, but with a leg up.

[Justin Fix]

Hey Everyone!

Excited to be on here. My friend and I have significant experience in real estate but are new to investing for ourselves. My background is commercial banking/investing. I'm in my 20's but have done a significant amount of deals (north of 500).

My friend is in his 30's and is a general contractor. He built new homes/small resi (<20 untis) in California for 8 years. Though now he's a director/manager at a large corporation in their int'l trade division. He got a job there right when the housing market started to go down. Very prescient in my opinion.

Both of us are only willing to invest a max $10k a piece (total $20k) on any one deal. We both feel comfortable only investing a max of 10% of our savings.

Where we fall short is my experience relates mostly to stabilized commercial assets (70% occupancy and up) while his is new SFH's. We also are not comfortable putting all our chips in for one hand.

So questions:
1.) What order did you do things in? I think we should try to find a partner to provide the majority of the funds. We would have skin in the game and would be the ones actively managing the project. Rather than trying to find deals we wouldn't have the cash to do right away. Or as a possible investor, would you only be interested in hearing the deals at the moment?

2.) How did you find investors? Or do you think our 10% rule doesn't make sense? Or too cautious / risky. Note: the 10% is liquid savings not net worth.

3.) Once you found an investor, how did you structure your business? I think my partner and I should have an S-corp with 50% ownership each. Then for each deal we do with our investor, we would set-up a separate legal entity.

4.) What property type would you recommend? Which did you wish you NEVER got into? Condos, SFH's, small res (<5 units) or commercial res (5+ units).

Condos -- less money needed but the association' restrictions can hurt since we're not planning to occupy the unit. Also, the association could have terrible financials. There's no way to audit that quickly if it's fraudulent. Basically, worried about buying an "Enron Condo".

SFH's--this is what we're leaning towards. I am just worried about finding the deals in the California market. Plus, new mortgage guidelines were issued and there's broad agreement there will be less loans overall (therefore a fall in homeownership)

small res (<5 units) We don't want to live in one of these. The margins just seem too small. Cash flow usually doesn't make sense but fixing it up adds no value as new tenants will probably destroy it.

5+ units -- Margins make much more sense here, but the amount of cash might be prohibitive. Exit: rehab, refi-cash out, hold 3+ years, sell. 3+ years is so you have strong track record.

Thanks Everyone!

Justin