Partnerships and Profit in a low cashflow market

Partnerships and Profit in a low cashflow market

Member since 2021 · 3 posts · 1 vote

Hello BP, I wanted to ask a general question about how to structure partnerships in a low cashflow market. I'm investing in Austin TX and want to do BRRR properties. I have two single family rental properties that cashflow ok right now and would like to do more but I don't have the cash to do more properties by myself right now. I'm wondering about ideas for how to structure partnerships with an investor so it is a win win. Properties in Austin don't cashflow very well and I have trouble seeing why an investor would want to partner(and therefore how to approach investors about potential deals).

Would it be appropriate to do a simple equity and cashflow split? I'm not looking to just be a wholesaler and make a few bucks commission by selling a lead to someone else, I want to be an actual partner on deals. 

Not sure how to set something like this would be set up when cashflow is already so low and I've never worked with a capital partner before. Any advice would be appreciated

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  • Member since 2019 · 67 posts · 17 votes
    5y

    When I have approached investors for BRRRR opportunities, I give them 2 choices:

    1) I'll treat them straight as private money at a fixed rate for a fixed period of time (2 years), at which point I would have completed the BRRRR. What I find is that they typically like knowing that they are getting their money to grow for longer periods.

    2) I give them equity in the house, 50/50 and we hold the property until it doubles in value. They get no Cash Flow.

    Hope that helps

  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    5y

    @Andrew Tonkin I think you'll find what you're offering to be attractive to other investors, probably out of state investors, that want to get in on the Austin market and need a local's help to get it done!

  • Member since 2021 · 3 posts · 1 vote
    5y

    @Aaron Signer How do you convince investors to just take equity and no cashflow? Do you keep the cashflow?

  • Member since 2019 · 67 posts · 17 votes
    5y

    A lot of people are very happy to get between a 5-7% return on their money. 

    I break down how the bank's leverage + tenant loan paydown + appreciation exceeds the 5-7%. If I am ever asked about the Cash Flow, I cite that is for my ongoing management (even though they are aware that I will be hiring a PM).

    Show them the numbers and tell them it as a story. Powerful combination.

    @Andrew Tonkin

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