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Updated over 3 years ago on . Most recent reply
Help getting started as a investor with two of my closest friends
Hey ya'll I'm new to the community and based on all of the posts that I've seen so far I've seen I'm glad to have found a community as supporting and inspiring as this one. As the title mentions me and two of my closest friends, we've known each other since elementary school, have always had the dream and passion to get into real estate with one another as a full fledge business. A little background information on us is the following.
We all just recently graduated high school and are currently confused on where to lead on from here. I currently am in training to become a EMT and eventually work my way to a paramedic to be able to support myself and provide for personal expenses. The first friend is unaware of the route he wishes to pursue but is dead set in the idea of revolving his career around real estate. And the second friend currently works with his father doing roofing and other contracting jobs such as flooring and the occasional repair, which I find immense value in him as an asset to the company as he maybe be able to mitigate many of our costs in repairs and renovations as his skills and experience may help us to prevent other contractor costs increasing our profits potentially.
Now comes to the main point of this post. The sense of direction that we so desperately need to be able to establish ourselves and turn this dream of ours into a reality. One of the main points of conflicts in this came with us unsure of how we would equally manage and distribute the profits of our investments. We had toyed with the idea of an LLC, but are unsure of how we would go about setting that up.
As well as that we have also looked into the idea of "House Hacking" and getting multi family property with four units. While this quite ambitious for new investors like us but we figured it would allow for us to live in one unit and rent out the other three and allowing one person to manage and develop a style and feel for the environment of rental real estate.
We also have over the few years that we have been in the workforce have managed to clump up a fairly substantial amount of funds that we all equally put in since we turned sixteen and have accumulated roughly twenty-five thousand dollars from working part time jobs and other odd jobs we did throughout high school. We also plan on still continuing to add to that money pile until we find a sense of direction and allow us more purchasing power.
We hope to get started in a fairly competitive market like Austin, Texas or San Antonio, Texas as we currently live not far from those locations currently, and feel that the adversity that we would face in those markets will create a environment that will allow us to thrive and grow as young and ambitious investors.
Thank you for reading through this fairly long post, but any advise or questions that you have for us would be greatly appreciated!
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To make the most out of a three-way partnership, you're going to want to focus on commercial real estate as soon as possible. You're also going to want to find private financing. Those two objectives suit an LLC very well.
With that in mind, begin to test the strength of the partnership by creating an LLC. You can hire a lawyer to do it and it will cost a couple grand, or use an online tutorial and tool to do it yourself for a couple hundred. Open a bank account for the LLC. Transfer the saved funds into the account.
While you are working on that, one of you should begin researching private and hard money lenders in your market. Put a list together and begin calling to ask questions on the process. The other one of you should begin searching to identify properties that you would like to acquire.
In order for the investing portion of your efforts to work, you need to pick up value-added type properties where you can buy cheaper and rehab to create more value. When you can do that, you can refinance out of the private and/or hard money loans into stable bank loans and begin renting your acquisition.
If this process goes smoothly, you have a functional partnership. Congrats!
There's so much left out of the above outline, but it should give you a sense of the flow and actionable steps to follow. And if you're curious, the LLC in this situation accomplishes to goals: it gives you a safe place to park money where no one can fight over it, and it enables you to accept loans from hard money lenders, many of whom will have a provision in their lending agreements that forces them to work exclusively with LLCs.
(One final word I'd strongly consider: push all profits the business makes back into the business until there are enough profits from the business to support each of you independently. It will go remarkably fast if you choose to do that. Otherwise, I suspect you'll find one of the three of you will ease off the gas too soon and stress the partnership.)
Best of luck!