Partnerships and joint ventures

[Reggie Maggard]

I’m looking to do partnerships in which I have control and give returns to investors. But my real estate strategy is to use it in the buy and hold space.

So here is what I’m thinking...if I buy a fourplex for 250k, the dp is about 67-70k...if I get an investor to give me that money, through an llc or whatever, how can I structure the deal?

I’m thinking like 8.5% interest only until I have enough equity and room to pull out that 70k and payoff investor. But that might take 8 years, so who is going to want to do that?

Is it best just to use my own money and go slower?

[Derek Dombeck]

There is certainly many different ways to do this, but here's one of my favorites. We buy a property that may need some rehab before its rented out and I don't like to tie up my cash long term, so I bring in a financial friends IRA to put up the funds. They are going to receive an Option for (X % ) of the equity and or cash flow to be paid at a future date. Here's an example...... this week, I bought a house for 100k. I paid the seller 15k cash, took over her 1st mortgage of 70k subject to, and she is carrying a 2nd mortgage for 15k at 0% with $200 payments until paid in full. The house needs 5k in updating. So, my friends IRA will put up 20k for 50% of the equity at the time we sell, whenever I decide to sell, in the future. He will be protected by an Option contract. I keep all of the monthly cashflow in this deal and I have zero cash out of pocket. When we put a financial calculator to the deal, my friends IRA will make a projected 27% ROI. Since his money is not a loan, I don't have to pay him a monthly payment. As I said, there's many ways to deal structure. You just need to be intentional when you do it. In this example, my friends IRA does not get any benefits from ownership or depreciation, so we keep those benefits. He does benefit greatly from the zero percent 2nd mortgage as principal reduction increases equity. Hope this opens up your thought process a little.