May have big money investor/partner and need advice

General Real Estate Investing
9yFollow

May have big money investor/partner and need advice

Brian R.
Burlington, KY · Member since 2013 · 58 posts · 65 votes

Hello.

I have a scenario I would like to get some feedback on. I currently have no money to invest but I am a fast learner and the wife and I rented out her condo when we got married for a few years. I know some stuff and can learn the rest by spending all of my free time doing research and speaking to professionals. Here is the question.

I have a friend who I spoke to about investing in rental homes. He mentions his Brother In Law who lives outside the country and is not a citizen (my friend is a citizen) asked him to invest in real estate and manage it for him a few months ago when they visited him for a week. To be clear his BIL has cash money to invest in real estate. My friend told him he knew nothing about it and that was that. Now that was a few months ago. He still needs to find out if this cash still needs a home but he trusts me and knows I will work hard to ensure we make money. This cash is over a million dollars and I just want to get some tips on how we should set up this partnership and what percentage should I get for doing ALL of the work. My friend would not be helping in any way. The BIL would likely just give him the money so I would be partners with my friend. Any and all suggestions are welcome. It is still a long shot on whether this will happen but I may have other investors that could do maybe half a million if this falls through. I understand you not wanting to wast your time on a hypothetical scenario but I would appreciate it if you do.

My basic plan is to buy several 3bd, 2+ba homes (around 150k each), leaving plenty in reserves. This would be done one home at a time possibly at auction or foreclosures since cash would be readily  available. Once it is made ready and rented then buy another. Cash flow would be coming in from the rents and at some point we would probably need to start taking mortgages out on some of the properties to purchase additional properties. No money would be taken out for many years. I would be working for my percentage of the company, basically earning my equity. At some point I may need to quit my job and do this full time and then I would also need a salary. I would love to have that problem. The goal is to buy as many cash flow positive properties as we can manage for 10 to 15 years and then retire comfortably.

Thank you for any input you may have.

Brian

0Reply
19 views

Most Popular Reply

Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
9y
Originally posted by @Account Closed:

I dont like it. the best way to lose a million dollars is have some newbie go flipping houses on your (friends BIL) dime.

Money-less people thinks its EZ to make money with other peoples money without skin in the game.  IT ISNT, actually it tougher.  Losing ones money is one thing losing money not yours is Another.

 So don't lose it.

1Reply
See this reply in the discussion

19 Replies

Jump to latestLatest
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    9y

    You need a system that regenerates your seed money so that it never runs out, and the understanding that you NEVER, under any circumstances, SPEND you "seed money".  I use is the 3 Level System I developed.  Here are the basics:

    Level #1 - Source of funds and debt payment of funds.  This is where you get all the funds you will ever need to invest (Min $300k, max $1M) and invest PART of it in an investment that pays off all the debt associated with these funds.  The remaining unused funds becomes your "Seed Money", and moves into...

    Level #2 - Compound your "Seed Money".  This is where you flip for profit, with all the profits, in the beginning, going back in thus growing your "Seed Money".  Once large enough, Profits can be "spent".  NEVER SPEND YOUR SEED MONEY.  In the level, you are using your Seed Money an infinite number of times.  Profits now move into...

    Level #3 - Passive Income on Steroids.  This is where you use the continuous stream of profits from Level #1 to buy "Cash Flow" Properties.

    Depending on the Market you are investing in, based on the dollars you are talking about, this should take you no longer than 1- 3 years to get to Level #3.  Here in MI, it shouldn't take longer than 1 - 1.5 years.

    0Reply
  • Brian R.
    OP
    Burlington, KY · Member since 2013 · 58 posts · 65 votes
    9y

    Thanks Joe.

    The one problem I see is that flip worthy homes in this area are few and far between. Even run down homes in need of repairs only go for about 20k to 30k below market for a home in good condition. It seems like it would be easier to just buy homes slightly below market value if available and rent them out. Eventually needing to borrow against some of them to buy more. We would always have a stream of income from the rentals. We would always have assets that equal or exceed the original amount invested plus rents coming in. If we take no money out except expenses for 10 yrs we would have built it up a lot I would think. The funds are not needing to be paid back other than the ownership the investor would have. My thinking was maybe a 50/50 split in the ownership in the company with the initial investment subtracted first. In other words I would get 50% of any value that we add on top of the initial investment. Do you see any major flaws in that plan?

    Thanks,

    Brian

    0Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    9y

    @Brian R.   Then you are in the wrong market.  Pick a different one.  You can't make a market work if it doesn't want to play nice.  You are in a perfect position to invest out of state...where "the grass is greener".

    0Reply
  • Brian R.
    OP
    Burlington, KY · Member since 2013 · 58 posts · 65 votes
    9y

    It is more likely that I just don't know where to look to find better deals. I have done a lot of reading over the years but have not really had the money to invest so I have not really looked for fixer uppers except on the mls website and for sale by owners type searches. If i can make money renting houses then why not do it close by so I can manage them myself? Please understand that I am not arguing with you. I know you know more about this than I ever will and I want to learn. Thanks for your responses.

    Brian

    0Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    9y

    You're time is more valuable than anything.  I don't manage my properties.  It's well worth it too me to be an investor instead of a PM.

    You could be right, that you just are not analyzing properly. Market analysis is critical though, as is how money works, and how to build (and stick to) a REI long range plan.

    First, take a look at how much cash you have, and how fast it will disappear when you "spend it".  When you spend it, you are relying on your CF to "catch up" to it.  When it does, you've only broken even.  Until then you are behind.  If you spend your profits, and those profits are being regenerated over and over by the "use" of that $1M, then you have an unlimited supply of FREE MONEY to use.

    0Reply
  • Brian R.
    OP
    Burlington, KY · Member since 2013 · 58 posts · 65 votes
    9y

    Makes sense. Thanks.

    0Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    9y
    Originally posted by @Brian R.:

    Makes sense. Thanks.

     Actually, it makes dollars

    0Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    9y
    Originally posted by @Account Closed:

    I dont like it. the best way to lose a million dollars is have some newbie go flipping houses on your (friends BIL) dime.

    Money-less people thinks its EZ to make money with other peoples money without skin in the game.  IT ISNT, actually it tougher.  Losing ones money is one thing losing money not yours is Another.

     So don't lose it.

    1Reply
  • Brian R.
    OP
    Burlington, KY · Member since 2013 · 58 posts · 65 votes
    9y

    I didn't make losing money part of the plan. I left it out of the plan on purpose. 

    Thanks Joe

    0Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    9y
    Originally posted by @Brian R.:

    I didn't make losing money part of the plan. I left it out of the plan on purpose. 

    Thanks Joe

     I assumed that part.  LOL.  The rest is pretty easy to learn.

    0Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    9y
    Originally posted by @Account Closed:
    Originally posted by @Joe Villeneuve:
    Originally posted by @Account Closed:

    I dont like it. the best way to lose a million dollars is have some newbie go flipping houses on your (friends BIL) dime.

    Money-less people thinks its EZ to make money with other peoples money without skin in the game.  IT ISNT, actually it tougher.  Losing ones money is one thing losing money not yours is Another.

     So don't lose it.

     Given what little we know of OP would you give him 1M to invest however he wants?

     That isn't his question.  If he gets the money he wanted to know what to do.  The "lender" decides if he gets it or not.

    0Reply
  • Brian R.
    OP
    Burlington, KY · Member since 2013 · 58 posts · 65 votes
    9y

    I'm guessing you would tell your friend to go find someone else if you were in my shoes? We all have to start somewhere and just because some people start from almost nothing and make it in REI without an investor doesn't mean that's the only way it can be done successfully.

    0Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    9y
    Originally posted by @Brian R.:

    I'm guessing you would tell your friend to go find someone else if you were in my shoes? We all have to start somewhere and just because some people start from almost nothing and make it in REI without an investor doesn't mean that's the only way it can be done successfully.

    Brian, you're fine. You do need to learn these things though, but you're no alone. Many "experienced REI" don't know these things, and make decisions based on that lack of knowledge. Knowledge solves problems. I learn every day...at least I like to think so.

    As far as your source getting into a risk position, that could be said about almost any REI out there. There are a number of ways to control that risk. That's where all 3 of those "knowledge must" come into play...and all equal.

    0Reply
  • Brian R.
    OP
    Burlington, KY · Member since 2013 · 58 posts · 65 votes
    9y

    Thanks Joe. I plan on doing plenty of due dilligence and learn as much as possible before I dive in. There are multiple ways to successfully invest in real estate and I want to do it right whichever avenue is taken. I never assume I know something without double and triple checking my assumptions for flaws. We can all learn something new and that leaves a lot for me because its all new.

    0Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    9y
    Originally posted by @Brian R.:

    Thanks Joe. I plan on doing plenty of due dilligence and learn as much as possible before I dive in. There are multiple ways to successfully invest in real estate and I want to do it right whichever avenue is taken. I never assume I know something without double and triple checking my assumptions for flaws. We can all learn something new and that leaves a lot for me because its all new.

     If you have any questions let me know.

    0Reply
  • Brian R.
    OP
    Burlington, KY · Member since 2013 · 58 posts · 65 votes
    9y

    I am sure I will have many. I will try not to bother you with questions that I can find out by searching these forums. I have alot of reading to do. Thank you.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free