Ideas for newbies to jump start real estate investing.

[Howard Manning]

As an experienced rehabber with about a million in equity on paper I'm finding it hard to get either private money or hard money funding to fix and flip.  Newbies must find it nearly impossible.  So I like to explore ideas to jump start newbies in RE investing.  A thought I have is to set up a Joint Venture with a group of 5 or 6, primarily newbies and maybe some experienced investors, to get the first property to fix and flip.  After 3 or 4 properties the members could start drawing out cash from profits to start their own individual deals.  Each would need to kick in about $5000 to qualify for private lending, rather than the full $25,000 to $30,000 which for most of us is nearly impossible.  

Any ideas on how to structure such a group and how to hold title, and the funds.  I welcome your input.

[J Scott]

First, I would definitely get an attorney involved, just to ensure that no securities rules are being violated.  As Karen said, the devil is in the details, and how you structure could lead to whether or not the group is successful.

Since I'm better at the tough questions than the cheerleading, let me throw out a few:

- What happens when the group buys a property, but can't agree on the rehab strategy?

- What if there is disagreement about costs/contractors?

- Who decides whether to accept/reject/negotiate offers?

- What happens when a deal starts to go south and the fighting over control starts?

- What happens when part of the group feels they are doing more work than the rest?

- What happens if you can't sell a property and need an alternative exit strategy?

Partnerships are tough.  Partnerships with lots of partners are very tough.  Partnerships with lots of partner who each have little experience is ridiculously tough.

Not saying it can't work...but make sure you consider all the worst-case scenarios and mitigate for them...