If I don’t need a partner ... Should I start off alone?

Question

I am a noob to this. I have bought renovated and sold 2 houses as personal residences. I decided it is time to BRRRR. I have enough resources and DIY experience to jump into my first BRRR in my market solo. I have vetted 2 potential partners who are still considering...Thinking time may be of the essence

Damian Ramirez · Answer

@Allen Honnila

Partnering can be a plus if you use it to your advantage and if you choose a partner that has strengths that you are lacking in. In your situation, it seems like you have capital and DIY Experience, so in this case, finding a partner with more BRRRR experience is something you should be looking for.

Some folks prefer not to partner, and it's understandable. They would like the whole piece of the pie or they would just like to not have to make decisions that require the approval of another person. However, partnering can cover your blind spots, expose you to less risks and prevent you from losing capital, and can be much easier to handle if responsibilities are delegated properly.

I personally believe that partnering is the solution, especially if it is someone's first time doing RE Investing or a BRRRR in your case. It can help you scale faster, it allows you to have more capital at hand, and if your partner has the experience, HML's and lenders in general would be more keen to lend to you since you aren't by yourself and they know one of you has the experience in flipping/buy and holds.

We happen to partner and JV with other investors in the Cleveland market frequently. We usually provide the boots on the ground and project managing, while our partners, experienced or not, come in with the capital to lend.

Hopefully this aids you in making your decision. If you have questions, feel free to PM me. I'll send you a connection request in the meanwhile!

Damian Ramirez · Answer

I completely agree with Account Closed. Asking these important questions and how the potential partner responds and what they tell you is vital. Pay attention closely and verify the information they tell you. If you verify thoroughly, and the information checks out, then you know whether they are the real deal or not.

Account Closed · Answer

A successful partner is worth his weight in gold for the first project or two. You don't know what you don't know until you need to know and that is one reason you partner. Then you pick his brain and if he is a successful partner, you learn a lot.

Have lunch with the potential partner and ask him how he treats Dodd-Frank, what is his asset protection method. Ask him to show you on paper the difference in how much goes into your pocket if you buy & flip a house in the same year (what is the tax consequence) and have him show you the numbers if you hold on to the property (what is the tax consequence there). Ask him what part of the real estate cycle are we in and what his plan is if things go their natural course. Ask him what his plan is if when the project is complete and you go to sell, the property sits on the market for 6 months instead of selling right away. Let him sell you, on why he's the right guy. Nobody will look out for your money like you will.

Andy Nathan · Answer

@Allen Honnila alot of great advice already. I would add the biggest questions you need to ask yourself? Is there something a partner can do that you can't?

Also, it seems like these partners might not be ready to move forward. How eager are they to invest? You don't want a fair weather partner.

Finally, what is your tolerance level with partners? Do you need to make decisions? Real estate often comes down to relationships. How good is yours with your partner?

Hope this helps.

Andy

Anthony Dadlani · Answer

Partnering does have its advantages....diversifying the risk, having someone else to share ideas with.

Best of luck in all your endeavors.

Allen Honnila · Answer

@Todd Rasmussen

I like your thought process.  Consolation prize is a way I had not thought about it.

Todd Rasmussen · Answer

@Allen Honnila

The greater the risk, the greater the return or loss. It sounds like you have great experience in the rehab step. How familiar are you with buying, renting, refinancing? Any one of those can make a blunder out of a BRRRR but you have to get every step correct to cash out completely and comfortably.

If your funds that can stay in the deal, I think you have little risk over what you've done already. Leaving some equity in the deal for cash flow is a pretty great consolation prize. If you are using money that has to be pulled back out then a partner would be a great way to share some risk.

Todd Rasmussen · Answer

I'm sending you a PM, I'm hosting a virtual meetup to discuss the refinance R.

Allen Honnila · Answer

@John Farady

Not only is that food for thought, I believe that is a whole meal! Thanks John for the insight and advice. I do wrestle with noob and having the insight of a couple decades life experience. Your perspective represents a balance between the two.

Allen Honnila · Answer

@Damian Ramirez

Thanks for and Good to know the HML appearance factor. One of the things I will today be learning about is the connection thing. I am honored!

If I don’t need a partner ... Should I start off alone?

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