Thoughts on Partnering up?

Question

Hi BP,

Just curious as to what everyone thinks about partnering up with someone to invest in an income property?

My situation: My fiance and I are in the process of buying a duplex through an FHA loan to live in half and rent out the other. We are saving a lot of money through the use of that loan and id like to start planning for a second rental property already. When this deal is closed (Hopefully in March) I plan to have about 10k left. We have a wedding in September (being frugal about it and it wont cost us much). So because the wedding will be less than 6 months after the closing of this property, I figure we will wait until ATLEAST October to buy a second rental. At that time We hope to be closer to 18-22k saved. If I partner with someone, we could both throw down 15k each and invest in a property around 100-120k without much of a problem. Or I could keep saving until i have that money all myself..

What are your thoughts on Partnering up for investing in rental properties? any past experiences? Downsides? Upsides? would you do it again? Any info would help! Thank you.

Joe Villeneuve · Answer

@Joseph Shevy All the posters here are speaking from their own experience, not just making this up.  Like I said above, the key is the market and the market's profile to do this.  If the market you are investing in doesn't fit the necessary profile, then it won't work, but in my opinion also means you should be looking into a different market.

You don't pick the market, the market picks you.

Franklin Romine · Answer

@Joseph Shevy I probably wouldn't.  In smaller deals there really isn't much $$$ to go around.  If you can swing it or wait to create more capital you should investor solo.

Frank

Joseph Shevy · Answer

Yes, this was why I like the idea of partnering. It may be 1/2 cash flow but also 1/2 the expenses of maintenance. I have a few friends that could probably invest with me by year end. I also like that by doing a partnership n buying a property now, I could start seeing those returns now, as opposed to waiting another year or more to find the cash to do it.

Joe

Account Closed · Answer

I have partnered before, and am getting ready to do one now. I like it because it is less cash out of my pocket and I have someone else to help cover upgrades and repair costs. Just make sure you get everything in writing, no matter who your partner is and no matter how much you trust them.

Joseph Shevy · Answer

Hi Frank,

Thats true. thanks for the input. I look at it both ways and like them both.. On one side, Ive seen single family rentals go for around 80k, maybe coulda snatched it for 65-70... in that case, definitely should do it myself. But, I also look at larger triplexes or quads, or just nice duplexes in nicer areas that are going for closer to 150k or higher.. It would take me a long time to save for that down payment. Would you suggest looking for the 70-80k SFR's for now until im able to generate more capital for a larger down payment?

thanks,

Joe

John T. · Answer

Be very careful in your screening process with a partner.  When your told to get things in writing make sure you know what all to capture.  Each persons responsibility isn't all there is to it, it's very important to have mapped out the consequences when someone doesn't hold up to there end of the bargin either partially or completely.

My advice if partnering with a friend and you value the friendship make sure the partnership appears fair to both sides and they agree too.

Joseph Shevy · Answer

Joe,

I know I don't have a ton of cash to work with now but everyone has to start somewhere.. And I don't know anyone my age or in general already in this type of partnership.

Frank,

I need some convincing for sfr's.. I like that I can pick them up cheaper but then again if the tenant leaves or isn't paying for a month, there is no other tenant there to pick up some of the slack like with a duplex.. But one tenant would be much easier to manage than two. I am gonna start looking into them more for sure.

Joe

Franklin Romine · Answer

Target what ever you goal is.  I personally like sfrs they are easy for me to manage.

Frank

Joe Villeneuve · Answer

I partner all the time.  Mostly with out of state investors now since our Michigan markets are great for cash flow...and low cost.  You just need to spell everything out in advance.

The problem I see, is the dollar amount you are talking about will severely limit you in both buying power and length of time to go from deal to next deal.

I would suggest that if you are looking to invest, and already contemplating a partnership, instead of going in on a new deal, go in on an existing one.  Just buy into and existing deal that has a track record of cash flow.  The person in the deal would have to be willing to do it, and also looking to get a lump sum of cash.  This is true for those that have all their cash tied up, and would like to have more in order to move into their next deal faster.

Thoughts on Partnering up?

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