New Partnership of friends looking to get started!

[Dan Previti]

Good morning all,

My name is Dan and I've been lurking on and off of this site and listening to some of the podcasts for about a year so far.

A few close friends and myself started a General Partnership officially as an investment club and have been only in the stockmarket thus far.  Most of us live in the NYC suburbs.  My experience is in trading stocks and options, but we want to explore getting into real estate to start generating passive income.  We've done a lot of beginner homework and of course are at that point of analysis paralysis.

My issue is that I feel we need to learn a lot while the other guys are in 'let's just pick one and do it' mode, while doing almost no homework.  Maybe I am over-analyzing but there needs to be a middle ground.  

Going to list a few of our metrics and what honestly I expect the group being able to do.  

1.  I know we are not as passionate or committed as others, and won't get the best deal possible.  We all have full-time jobs, families, or just lack of dedication to really dig deep and find a good deal.  I'm ok with this because I know the others will not change, but I also do not want to do nothing just because we won't get an amazing deal.

2.  Our plan is to get into buy and hold rental properties.

3.  The group is choosing to focus in the Plano, TX surrounding area, or closer to home near Jersey City, NJ.  Plano was chosen not just because it is on all the websites as a hot area, but because a few of us also have work/friends ties in that area and we could probably get there more often.  My take and from what I read on the Dallas forum is that it is a very competitive area, so I don't expect us to 'find the deal' if we are not boots on the ground.

4. We won't be going door-to-door, doing direct mail, driving for dollars, etc.  I love it all and listen about it and I completely understand the benefits of it.  But I know our guys are quite frankly, too lazy or not interested enough to do this.  

5.  Financially, we have about 40k pooled in our fund now, and inject about 15k each year (before any gains/losses).  There is a likely possibility that once we were really ready to buy, we could inject another 20k or so as a one-time down payment boost.

I try to get my friends on this site, to listen to the podcasts, read, learn, etc.  I know I am benefiting from the shared knowledge, but I'm having trouble getting the rest on board.  Most are apprehensive because they think there has to be a catch or we have to buy something.  I know this isn't the case as I've spent a lot of time, but this is my predicament.  I don't want to be the one guy doing all the homework (and also I have a family and young child and I physically can't do this myself on top of everything else).  So some of my questions are:

a) How do I get others on board to help or pitch in their fair share (triple rhyme lol)?

b) Is is realistic for an LLC to be able to put less than 20% down on a property (conventionally). All 5 of us have excellent credit and are employed to back this. I don't expect us to pursue creative means because I already have issues with guys doing a simple task, let alone anyone taking initiative to find ways to finance with less $ up front.

c) Does going turnkey make sense for a group like us who are honestly unwilling to spend a lot of time doing this?  I always do my DD and will end up fact-checking everything if we deal with a turnkey, but I wonder if this would be easier for our group to handle a lot of the responsibilities that comes with owning an out-of-state rental property.

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Sorry for the long post and thanks in advance for any reading.  I welcome any and all feedback- good or bad is appreciated.

Thanks.

[Steven Loveless]

My $0.02 - take it with a grain of salt. I have a single B&H in a nearby town (Rockwall) that is slightly less expensive than Plano. It just barely cash flows so far (purchased Oct. 16, rented since Dec.) and that is because I manage and do most of the maintenance. I am still actively looking to acquire currently. To your direct questions:

a) Good luck with this - I've given up on trying to change people. If you don't trust them to "pitch in their fair share" I don't know that I would be mixing funds with them.

b) I can't help you much here because I just don't know. Could one of you personally get the note, and then add the others to the deed? One thing that I can remind you - you MUST HAVE RESERVES, and you will also have closing costs as well as pre-paid escrow items. If you figure $7k in closing costs + pre-paids, then keeping another $6k reserves (you must at least at all times have your insurance deductible in cash: North Texas = hail, winds, & tornadoes) then your $40k is really only $27k of down payment. I'm just going to tell you - there aren't a whole lot of $135k turnkey homes in Plano.

c) I may get jumped on here, but I haven't seen a single turnkey house in *nice* neighborhoods in DFW that will cash flow @ 80% LTV with management in place and conservative estimates for vacancy, repairs, & capex. Hell, the few wholesale rental "deals" I have seen over the past year or so don't even do it. Unless you want to move into less premium suburbs, I just don't see major cash flow occurring. If you are purely betting on continued appreciation - that is a different song & dance. Then the question just becomes how deep is your conviction that the market will continue to trend up?