Investing - What it takes

[John Zaranti]

Hello beautiful world of Real Estate, I have 4 business partners, we all live in the Chicago land area. We have been talking about getting into the Real Estate investment business for a while. We are finally in a good financial position in our lives to jump in! Can anyone else share their experience of potentially going into a multi member LLC with 4 partners? What does it take? What should we avoid? Best, John

[John Casmon]

@John Zaranti Hey John, before you jump into the flipping side, you should be clear on the roles and responsibilities of each member. Here's a short list of questions to address with your partners before you even start thinking about finding a project.

- Are you all doing the work yourselves or are you hiring contractors? 

- Who is managing the contractor?

- How is the work being split? What is each person's role and how is the equity being split?

- What's the exit strategy if a partner wants out? If you want to kick one out?

-If you take a hard money loan who is signing on it? Are they being compensated for the additional risk?

As far as the actual flipping, start by figuring out your target areas. Are you flipping in the city of Chicago, elsewhere in Cook county or a different suburb? Know that some permitting and inspection processes are different and factor that into your plans.

What price points make you comfortable? I would suggest avoiding luxury flips starting out and buying properties that could also work as rentals in case you can't sell for your desired price. Pay attention to comps and seek out the market data - after repair values, average days on market, the types of finishes necessary and ensure your budget/scope of work includes these level of finishes.

Plan for the worse so you know what you need to work through with your partners and make sure you're all aligned on the vision. I would start by writing a business plan and partnership agreement and then actively seek out deals. It will help you make better decisions and move as a unit.