5 Friends Looking to BRRRR Together Need Your Help

[Matt Mank]

Hello all,

I am one of a group of five recent college grads that are all highly interested in RE investing.  We've explored the BP community and all feel that there is a ton of value in discussing with others (with more experience) our current ideas.  But we'd like your help, advice, intuition, anything you could provide.

We plan to pool our resources to split ownership of an LLC that will begin investing (BRRRR) in either single family, duplexes, or triplexes in one of a few potential markets. Our total initial commitments would cover start-up costs, approx. 20-25% down payment, and cosmetic rehab work ($5-10k). All-in about $75k. Based on our research, this should be enough to "get in" to the market.

Property #1 (potentially more) would be self-managed at first to save money. If the first property is a multi-family, one of us may live in one of the units (dependent on which area we buy in). We'd also hire a real estate attorney to assist in setting up the LLC structure.

More numbers...

Combined income of roughly $300k, combined debt of roughly $100k (student loans).  Average FICO score of 750.  None of our jobs have been impacted by COVID-19.  

We seek to enter the market in approx. one years' time (to save, and because some of us are relocating during that time), so we are seeking advice on what to do in the mean time. Is the LLC structure adequate/required? What is the loan process like for 5 people in an LLC? What else jumps out at you? If we self-manage, does the LLC still protect us?

Please poke holes wherever in these ideas that you can, we're looking for as much input as possible.

[Ramon Flores]

@Matt Mank First of all congrats in your enthusiasm in investing in RE at a young age. It is definitely great that you and your friends are excited about this.

I am not trying to "poke holes" in this plan, but be aware that an LLC is a big deal when you are partnering with 4 other people. Personally I wouldn't do an LLC with 4 other people because I have been burned with people that have made commitments to do business and then they shy away at the last minute. Think about what can happen... what if someone wants to stop investing? What if someone does not agree with the property? What if you do all the work and everyone else does nothing? What if someone has a baby and they insist on pulling all their money out? What if there are disagreements in the LLC and they insist on selling the property and splitting it 5 ways?

Please consider these things before you agree to an LLC. If I were you, I would rent a house with LOTS of bedrooms and rent them out to other college students. Save the money you make and BRRRR a SFH or a MFH. Hope this helps!