BRRR Partnership Strategy

[Mark Marino]

Hello, 

I'm just curious if anyone has had luck with structuring a partnership for BRRR investing, especially in the S.Texas area. I'm intrigued by the idea of utilizing BRRR but I'd prefer to partner with someone who has the experience and hustle to manage the process from sourcing to renovation to property management in exchange for a fixed fee or slice of equity and cash flow (without having to commit upfront funds to the project). I know I'd be giving up some of the value but I'd be okay with that if it was a mutually beneficial partnership that could be scaled with revenue sharing throughout the rental period and on any upside from a refinance or sale. I guess this would be similar to turnkey investing (e.g. roofstock) but at a more localized level with more of a partnership on the back-end (refi/sale).

Interested to hear if any others have gone down this path as I'm sure it has various pros/cons.  

Thanks in advance!

Mark

[Jerel Ehlert]

"Partnering" is my 2nd most common type of lawsuit that comes to my office (construction making the top of the list). At some point either the money partner will start questioning where funds are going or argue that the split is not right. Or the non-money partner is wondering why they are doing all the work and splitting a lot of profit with someone who sits back and collects on their sweat. 

You see where this goes?

If you want to do this, and it can be great, get a lawyer and do it on a per-deal basis. Get everything spelled out in writing BEFORE there is a profit to fight over. Figure out, in broad strokes, what happens if/when things go sideways. COMMUNICATION is key. Manage expectations.

Honestly, if all you bring to the table is money but you want to learn the flip side, be a private lender (promissory note, deed of trust (because...Texas)) but offer low interest (but DO collect some interest each month) and a split of the net profits (aka, equity kicker). Do construction draws - do NOT give all the rehab money at the closing table unless it is less than $10K. Interest on the note in the 3-6% range, and the equity kicker in the 20-40% range is common. It should work out to be about a 15-20% cash-on-cash return.

Do your due diligence on the people and the property. Get a copy of their driver's license, etc.