Multifamily Partnerships

[Eli Kallison]

Hey BP,

How do partnerships on deals generally play out? Do people usually come with a specific deal, or do partners generally seek out deals together?

I'm looking to pull the trigger on my first Multi in the next 6 months or so, and would love to work with a partner on something like this for a number of reasons:

1) (Hopefully) allows for the acquisition of more properties to mitigate risk

2) Share knowledge and provide insight/expertise where the other may not have it

3) Have a second set of eyes and opinions

If anyone has any advice, or might be interested in investing in Multis with a partner, let me know. 

-Eli

[Brent Smith]

great points being made. as a developer and deal maker I'll tell you that it's much easier to find a partner (especially when you need more of a financial partner/investor) when you already have a deal in-hand or conceptually. This means an acquisition cost, soft costs, hard costs, and basic financing terms estimated on a spreadsheet. The better of a picture you can paint, the more likely to find a partner. it's going to change so dont get bogged down in fine details... just make sure there is plenty of profit in the deal first. I cover this in my podcast "practical preneur". dont worry its free. 

you may even want to have the property under contract before approaching someone... or at least a verbally agreed "letter of intent" from the seller. most investors/partners are busy and dont want to be bothered with a "pie in the sky"--- generally speaking. however, once you get their attention with a viable deal, then it gets MUCH easier to get return phone calls/emails. 

on your proforma you can start with a profit share (equity split) of, say, 70/30. 70% to the investor and 30% to you. See how the returns look. If you can't give an IRR annually on their money of 20% then most investors will pass. once you get credibility and deals under your belt, then your risk goes down and they'll let you have more of the pie. HOWEVER, if you are putting in a significant amount of cash/equity, then you can probably demand more than 30%, etc. You'll just have to feel it out based on profitability. I did a deal once with very little money down but it was so attractive to the investor he let me retain nearly half the equity/cash flow. All deals are different, but the main points are covered above.

make just one happy investor/partner and his network will fill you up with other potential partners. raising money is very easy once you make the first guy a nice ROI.