30k and poor credit, partner with no money and a 780

Investor · Massillon, OH · Member since 2015 · 266 posts · 156 votes

I have poor credit, I have up to 30,000 to invest. I have about 10 years of rental experience. I have a friend, with little to no cash, but a 780 credit score. If we partnered up, would we be able to buy/borrow enough to make it a win/win? If not, would more cash in the deal help?

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

10y

I don't have a suggestion because i would never recommend this or do this.

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Brett Thomas
Waverly Hall, GA · Member since 2016 · 17 posts · 2 votes
10y
Following. I'm almost in the same position except I have decent credit with no rental experience.
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Jeffery Waicak
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Investor · Massillon, OH · Member since 2015 · 266 posts · 156 votes
10y
@Brett Thomas. Thanks for following
I got the idea off the back of a local property management company's business card. Said if you have cash we can return 5-10%, if you have good credit, but little to no cash down, you can be an equity partner. I'm going to meet with the ceo of the company about them managing, and ask about that too
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
common scheme in many markets however hooking up like this with someone you don't know is risky.
for both parties.
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Jeffery Waicak
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Investor · Massillon, OH · Member since 2015 · 266 posts · 156 votes
10y
@ Jay Hinrichs I know my friend, he said he's a high 700 score. How would you suggest to do the deal? Re attorney?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
I don't have a suggestion because i would never recommend this or do this.
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Jeffery Waicak
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Investor · Massillon, OH · Member since 2015 · 266 posts · 156 votes
10y
@ Jay Hinrichs thanks I respect your opinion
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
Jeffery the reason I would not recommend this.. is your putting up all your liquidity to go into business with someone you don't know.
they are risking their credit.. and the asset you can buy for the amount of money you have is not going to throw off enough cash flow (once split) to again in my mind justify using 100% of your liquidity ..
these deals don't always go well.. what would your position be if you lost some or all of your money or it is now tied up in a project that you cannot unilaterally get out of if need be.
so many other considerations other than I want to get into RE.. In my mind buying a rental with all your liquidity is not something you should do unless you have a concrete plan to scale.
you would be better off in the long term buying some sort of business or finding someone to back that is into short term quick profit deals and keep building your nest egg
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Jeffery Waicak
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Investor · Massillon, OH · Member since 2015 · 266 posts · 156 votes
10y
this isn't my nest egg. I will be investing this money one way or another. But, if the issue is that it won't cash flow well, unless we are building equity at a nice rate, then it's not something that I should invest in
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Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
10y
In general I'm not a big fan of partnerships, especially advertised ones or with people you don't know as @Jay Hinrichs points out.
A couple problems beyond that though: a bank will only allow the borrower on the deed traditionally. You will be a legal nobody. No equitable or vested interest.
The bank will also want to know where the $30k came from. It is above an IRS-allowed annual gift as well, if you were crazy enough to go that route. It will need to be in their account for like 3 months prior.
Why does your partner have no money? A credit score of 780 is expensive I guess. Lots of payments. Lots of interest. That's why bank buildings are so fancy lol.
In a lot of OH towns, I'd imagine $30k is enough to buy outright or put a large down on a seller carry or TIC. Have you considered that route @Jeffery Waicak? 'Partnering' with sellers (no Land Contracts) is one of my favorites. Good luck!
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Jeffery Waicak
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Investor · Massillon, OH · Member since 2015 · 266 posts · 156 votes
10y
if I did it, I would want to get a multi family building. To buy a building outright would make no sense to put him into the deal.
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Bryan O.
Specialist · Lakewood, CO · Member since 2014 · 1k+ posts · 1k+ votes
10y
@Jeffery Waicak it looks like many missed that you mentioned it is your friend with the good credit, not a random agency pairing people.
If you were to do something like this, I would recommend an LLC with a well thought out Operating Agreement. You can buy the property in the name of the LLC, with the loan to the LLC, with him as the personal guarantee on the loan. Structure the rest of the responsibility, equity, etc. how you choose.
Just keep in mind, a commercial loan on a residential property will not be nearly as good of terms as a standard residential loan, so make sure your property is a winner.
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