Possible business opportunity, not sure how to execute on it

Buying & Selling Real Estate
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Possible business opportunity, not sure how to execute on it

James Taylor
Real Estate Investor · San Diego, CA · Member since 2008 · 23 posts · 17 votes

I live in San Diego, it is expensive to invest in real estate here.  

I have friends that have cash, and would love to do what I do but don't want to do it themselves.  (I have rentals in my hometown and surrounding area in WI)  I have been approached by people that have money and would want me to invest in properties in that same area for them. 

I know there is an opportunity here but I'm not seeing it.

I don't want to move back, so I won't be able to gain from the management of their property.  I would be able to check on the properties from time to time and have the houses checked on by others, and maybe even get some easy maintenance done for all of them at a discount as I have those connections.

I was thinking that I could take a percentage of the close, and a percentage of the management fee.  I would have to work that out with my property manager/realtor.  I would also have to work out with my property manager if she would want to do more properties.

I was thinking that maybe a friend could open a management business, and start doing that together.  I would just get a percentage, but I'm not sure how many properties he would be managing so that could be a full time job for him.

So I'm at a loss.  I have friends that want to get into real estate with cash sitting idle and I am sitting idle not knowing what I could do for them and for myself.

If anyone has any other ideas I'm open to suggestions!

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  • Joshua Pagan
    Philadelphia, PA · Member since 2016 · 29 posts · 2 votes
    9y

    By having your friend open up a management company that would give him the opportunity to become a business owner. Working together with him, and I am assuming that you have managed properties before, you would be able to coach him through the steps. If he/she is willing to start a business than this sounds like a great solution for the situation you are dealing with and here is why, IMO.

    Friend starts profitable business 

    Friend has reputation because of profitable business and allows him to expand said business

    You take a percentage of his margins 

    Everybody profits, new business is started, experience is gained

    everybody is happy.

    Of course this is an ideal situation, though I do believe that this is the best solution IMO

    Hope it works out!

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  • Don Alder-LaRue
    Real Estate Agent · Palm Springs, CA · Member since 2016 · 81 posts · 112 votes
    9y

    Sounds to me like a partnership is in the works.  You each have something the other wants or needs and can use (your friends have the money but not the experience, you have the experience but aren't in the area).  Leverage is everything....Other people's money, Other people's knowledge, Other people's time.

    Since you don't live in the area, are your friends able to "disconnect their emotions" from a property.  I'd check that first.  Someone is going to have to look at the actual property before the buy and many people aren't able to disconnect their emotions, meaning they look at a house as if they'd be moving into it instead of  an investment, so they pass on a lot of good investments.  If they CAN do that, then half the battle is over.

    Start building a power team in SD.  You know...the Realtor, Hard Money Lender, contractors, wholesalers etc.

    You bring the knowledge of how to evaluate a property, they have the money.  You be in charge of running the numbers, interviewing the power team members etc.  Let them be in on a conference call when you do that so they can learn too.  Find a property where the numbers make sense, and it cash flows properly.  If you have every thing fixed as soon as you buy, you won't have much property management headaches so a management company shouldn't be needed.  The handyman on your team should be able to handle most problems within 24 hours as they're reported to you.  Your friends/business partners should be able to drive by the property at least once a month to check it from the curb and make sure basic maintenance is being handled (the lawn mowed, place isn't looking trashy, etc).  Since you already have property in the area, you may consider getting a property manager to make it easier on everyone.

    Sounds to me like a 50/50 partnership on this would be pretty simple.  Just be sure to get it in writing.   Split the cash flow, and keep an eye on the market so you'll sell at the right time and gain from the appreciation.  

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