triplex underwriting and JV questions

[Mike Carr]

I need some help overlooking the #'s before I present this to a potential JV partner. I have been marketing to small multi-family properties in my market (Delaware) and have wholesaled two so far. Id rather be buying these but I am having a hard time with banks and creative financing methods so I want to approach a few people in my market to JV. Any help is greatly appreciated.

My background: I have helped managed and maintain my parents' rental properties for over a decade. I started my business a few years ago after college by flipping and wholesaling properties. I just started to build my rental portfolio a year ago. I currently have three cash flowing properties. Short-term goal is to have 30 total units through multi-family properties in the next 2 years with a JV partner.

JV Structure: 60/40 split. Jv partner gets 60% and my company gets 40%.

My roll would be to find the property, perform due diligence (cover costs), manage the property manager, inspect when necessary, make repair/operating decisions, and provide monthly statements and updates. 

JV partners roll would be to provide funds for down payment, fund operating account (15% of gross rent), fund mortgage escrow account (if bank requires one), and cover closing costs.

We will open an LLC/LLP to purchase and manage the property through.

Property: Triplex with FMV of $145,000-$155,000 range. Gross rent is $26,400. I have not seen the inside of this one yet. But this is a typical deal we have been coming across.

     Purchase

Price                                $120,000 

Down payment            $30,000 (25%)

Closing costs                  $6,000 (5% estimated)

Mortgage escrow            $3,618 (6 months of payments)

Operating account          $3,960 (15% of gross rent) 

TOTAL initial investment $43,578

Expenses

Taxes             $957

Insurance       $800

Management  $2,640 (10%)

Utilities           $900 (sewer and common area)

12% misc       $3,168 (covers repairs, lawn, snow, etc)

TOTAL           $8,465

Mortgage

$90,000 balance at 5.25%. 20 year amortization. 5 year balloon. $7,236 ($603 per month). I am looking for 30 year fixed financing as well. 

60/40 split

$26,400(gross income) - $8,465(expenses) - $7,236(mortgage) = $10,699 Net (pretax)

60%= $6,419 which is a 15% cash on cash return from the initial investment.

40%= $4,279 for my company. 

Questions: Is this something you would present to a JV partner? How is the structure of the deal?...is there an easier ways to structure/operate this? Are there numbers I am not factoring in? How would you go about asking a potential JV partner? Thanks for any insight on this process.