All Forum Posts by: Brandon De La Pena

@Brandon De La Pena

Jason, being an attorney, is probably best to handle the ins and outs of the two options that you outline.  

From a different level, do you want another active partner or passive partner?  This will also create some nuance in the structure, but the items below can really be used for either.

I always think of a "partnership" (whether truly a legal partnership, LLC, JV, but I am using it in a general sense) as having two distinct areas. First is the money. Who is putting up how much of the money and whatever the ownership for putting up money is, is divided up pro rata based on money invested.

The other side is the "work".  Finding a deal, underwriting, managing, signing loan docs, etc.  This has its own value in the deal.  Now, this can be all fee based or it can ownership based, or a combination of both.  Then you allocate responsibilities here, if your partner is actively involved too, and each role has its own fee and/or ownership rights.

Let's say the "work" is 30% of the deal and the money is 70%.  Then you say sourcing deal is 20%, managing is 20%, putting your credit behind the loan is 10%, etc.  These allocations are of the 30% for the work.  So effectively, you sourced the deal, so you get 20% of the 30% work side (or 6% of the overall deal).  If you are doing it all, then you get 30% of the deal, plus if you are putting up half of the money, you are getting 1/2 of the 70% that side too.  So in all, you have 65% of the deal and your partner have 35% for putting up half the money without doing any major work.

And now, we get into what is work, because if your partner is truly hands off, no say or decision making abilities, you are selling a security and now need a securities attorney involved. The level of activity your partner needs to be able to do a JV is something you should talk to your attorney about.

You aren't in a position to buy right now and doing so would be reckless. You just started a new business and that needs your focus instead of trying to afford a mortgage while making no money. You could easily use the 32k as a down payment and lose the property because your finances can't keep up with the mortgage. 

Focus on growing and sustaining your business. Once you have good cash flow for a year, do a bank statement loan. 

Here is my advice to you. Give yourself another year of working hard on your business. Usually things start to really click after a year in business, any business. Once you have good momentum and can take attention off of your business and still sustain the income, purchase. 

Congrats on saving the 32k at 21! 

 Brandon

Don't take this wrong, but you are in no position to buy a house.  You have no track record of stable income and while saving 32K is admirable, it's not enough to buy an investment property.

Wait 2 years as a financial advisor and then buy a multi family property using FHA. Live in one of the units. Then do it again the next year. After that, buy a single family property. Do all of this while using conventional and FHA financing.

After you've exhausted ALL of your conventional and FHA financing, you should consider a DSCR loan but not before.

Stephanie

@Brandon De La Pena If you started a new business of any sort I would recommend you NOT focus on acquiring real estate. Focus on your new business. Once your new business is successful real estate can be a great place to put your excess cash.

If you can find a cash flowing property can you do a DSCR loan. As long as the rent covers PITIA you can get financing. The rates are usually 2% higher than conventional financing. Best part is you wont need to show any income taxes just need a credit score, an appraisal, and a cash flowing property.