Rental Property Investor · Los Angeles, CA · Member since 2017 · 154 posts · 24 votes
Hi BP,
I'm new to the multi-family investing space. I'm trying to make it a point to meet more new potential partners in the space. When you're acting principally as the "money man (or woman)" in a two-person deal:
1) do you have any advice for how to vet your new partner who will be acting as the "sourcer" for finding multi-family deals out-of-state? (e.g., they live in an area like the south or midwest where they can source good deals and you are acting as the person bringing the bulk of the purchasing cash). There's the obvious advice of hanging out with them for a bit and getting a "feel" for how they like to do business. But it seems the only way to really see how well it's going to go is to take a chance (hopefully on something small) and see how it goes, wiht plenty of contractual line items written out.
2) How do you like to structure the deal, esp. if it seems like it good be a good long term fit?
Do your due diligence on your potential partners by verifying their personal and career facts (some or most), ask for references, consider working together on a smaller deal, discuss and align on long term plans. As far as the structure TIC will probably be your best bet, but you should always consult with an attorney.
Also, when getting into a contract make sure you hire an attorney even if the state doesn't require one and have attorney spell out in the operating agreement all roles and responsibilities as well as various "what if" scenarios like "what if one partner dies or becomes incapacitated".
Rental Property Investor · Johnson City TN · Member since 2016 · 386 posts · 271 votes
7y
@Bruce P. - I would recommend going to meet the partner in the market of focus to interview them and verify their knowledge of the area. Review their investing history and talk to previous and or current partners. The deal structure can be whatever you want. Just get it drawn up by a qualified real estate attorney.
Do your due diligence on your potential partners by verifying their personal and career facts (some or most), ask for references, consider working together on a smaller deal, discuss and align on long term plans. As far as the structure TIC will probably be your best bet, but you should always consult with an attorney.
Also, when getting into a contract make sure you hire an attorney even if the state doesn't require one and have attorney spell out in the operating agreement all roles and responsibilities as well as various "what if" scenarios like "what if one partner dies or becomes incapacitated".
Will your potential "sourcer" also be your operator? Assuming this is a decently size multifamily property (30+ units) and you are bringing capital from other investors, it would be really important to have an experienced operator for the first deal or two.
As others have noted for #2, you can structure the partnership anyway that you please. If you are trying to establish a long term partnership, then you can form a holding company that will then own the individual entities for each property.
Rental Property Investor · Los Angeles, CA · Member since 2017 · 154 posts · 24 votes
7y
Hi @Chase Louderback, I assume by operator you mean property manager? The plan is to hire property manager(s). My potential partner(s) are more experienced in the field than me at the moment, and I hope to quickly narrow that gap.
Rental Property Investor · Los Angeles, CA · Member since 2017 · 154 posts · 24 votes
7y
Ah thank you for the clarification @Chase Louderback, it hasn't all come together yet although as a practical matter, I'd be leaning a bit more on the experienced partner(s) while I come up to speed.