All Forum Posts by: Brandon Hartman

Thanks, Wayne! It seems like our attorney's prediction was incorrect, which is why he told us to clarify with our CPA (previously I had read over and over here that LLC's can't get financing which is why we asked him briefly, since we don't have a CPA lined up yet to ask). Is it any different for a Partnership? If not, how do people typically invest in properties together when it's not just one person signing for the financing?

@Wayne Brooks@Dave Foster@Brandon Hall

Guys, thanks a ton for the great insight here.  As usual, it seems like I was over complicating things in my head.

When my partner and I spoke to our attorney initially he said that we might be able to get financing under our LLC as long as we signed as personal guarantors...he did say to speak with our CPA to confirm this though. We are interviewing a few CPAs next week before we select one to move forward with, we will seek their expertise on how to structure our acquisitions to avoid challenges with financing. Is is true that we could get traditional financing under our LLC by signing and personal guarantors on the loan, or was our attorney mistaken?

@Steve Vaughan

Thanks for pinging Bill, I've seen both he and Dave's posts previously regarding 1031's so I was hoping one of them would be able to help set me straight.

As part of my partner and I's year two growth strategy, we will each be purchasing a duplex with an FHA loan that we plan to separately house hack for two years (me with my girlfriend, he with his current roommate). After occupying them for 2+ years we will then be looking to 1031 exchange them both to size up under our LLC. While living in them we will be pooling capital together, equal contribution, to perform a live-in rehab to both properties to force appreciation over the two years we occupy the properties.

Disclaimer:  I have a very beginners level understanding of all of the principles being discussed and will be covering all of this this with my CPA and attorney in the future, but I first wanted to educate myself with the help of the experts of BP in advance.

My question is, what is the best path to get these properties from our individual names and into the LLC when we 1031 the two properties to size up into the new property/properties? Could we each get an FHA loan under our LLC/Partnership and sign as a personal guarantor; he as a personal guarantor on his duplex and me on mine, so that for tax purposes when we go to exchange we aren't transferring the taxable owner and nullifying the opportunity to 1031 exchange it? Is that even possible/qualifying? If yes, I guess my next question would be will we be able to obtain a FHA loan under the LLC by signing as a single personal guarantor on the loan?

Thanks in advance for any and all help, and please let me know if I was unclear in any way (I know this is a bit of an oddball question).

@Philip Cutting

Indeed, there are plenty of details to iron out ahead of time.  We look forward to meeting with you sometime in the near future.

@Gary Lallo

I think there are pros and cons to all sides.  Many great points have been brought up in this thread.  For many it does not work (my partner and me might end up as part of that bucket someday, that is yet to be determined), but there are always exceptions to every "rule" (or popular opinion).  

In response to Mr Ramsey's quote, assuming I'm understanding it correctly and it's meant to be "sail" not "sale" (if it is "sale" it may be some sort of play on words that's going over my head), I think the partners that started companies like Edison Electric, Warner Bros, Hewlett-Packard, McDonald’s, Microsoft, Apple and Google might have a few things to say.  Looking specifically in the Real Estate space the partners from JLL, Cushman & Wakefield, Newmark Grubb Knight Frank, and Cassidy Turley might also disagree.

@Brian Hayes

 Is there usually a new thread created when the upcoming meet ups are scheduled and confirmed?

@Philip Cutting

Great response.  We understand the risks of entering into a partnership and plan to discuss details with our attorney and CPA (when we decide on one).  The concern with the theoretical one year (as used in your example) when we chose to join forces, one of us is going to have been more or less invested than the other in terms of costs, time, etc...no two properties are going to perform/require management identically and it will be a hassle to try to square expenses up when we aren't just operating from a joint account under our company name.  Also, wouldn't a very extensive and detailed operating agreement mitigate the inherent risks of a "bad breakup"?  

We have already reached out to John Hyre with an inquiry to speak/meet with him as we try to interview and select a CPA to move forward with.  Our attorney also provided us with some CPA recommendations that we plan to interview, but John seems to be very highly recommended.  Thank you for the recommendations on John and Gina and I will send you a PM to make sure we have the correct contact info for both.  I'm curious to hear from them what the huge benefits would be by staying solo, given the tax benefits of LLCs.

In terms of the other questions, yes we offer equal capital, motivation, smarts, time, ability, etc.  There are no "handicaps" that either of us have that would require the true need for the other to be involved...both have good W2 income, both have outstanding credit, no legal issues, etc.  A major benefit is that we can divide and conquer when there are two of us...we both work long hours, so having one that is able to pick up slack when the other is unable will be nice.  Additionally, we can brain storm together and form up a strategy...instead of just calling our own shots with no other invested perspective.  Also, as I referenced above, he excels in some areas more than me...and visa versa.  We balance each other out very well.  The key is going to be to clearly define roles as mentioned by @Rob Beland above (which we have started to do) and working well as a team (which we have done for 3 years in our current roles).  I could easily do this myself, he could easily do it himself...the key is that we want to do it together.

I don't want it to seem like we are entering into this closed-minded.  Perhaps we are a bit, but, we are intelligent enough to recognize major benefits if they are presented to us by our attorney and CPA.  If it turns out that there are indeed material benefits to me getting my own properties and him getting his own initially, and we both work together to manage them and then join them under a partnership in the future...that's fine, we will go that route.  But there's really no doubt that we are going to do business together in the future, not separately.

Thanks to everyone for the warm welcome, the guidance/tips, and the invitations to get together and connect over a coffee of beer in the future.  Much appreciated and I hope to take you all up on those invitations sometime very soon.

Great question. We are partnering 1) because we committed to each other previously that we would go into business together (a deal is a deal), and 2) because we balance each other out very well.  We each have our own strengths and make a very strong team -- proven by what we have accomplished working together at our current employer.  While I have a strong financial mind, his absolutely puts mine to shame ( also...while I "like" it, he LOVES it).  On the other side of things, I excel at and am passionate about other areas of business (Operations, negotiations, dealing with others i.e. contractors, etc., economics, and so on).  He is a true talent in financial modeling and strategy/long range planning, much more so than I could ever hope to become.  

With our vision in terms of how large we intend to grow this thing, it's not going to be a one man show.  I will need a worthy wing man at one point or another...and this particular one I really enjoy working with.  

Most of all, I am a big believer that two minds are better than one -- even if it means it's more of a hassle to obtain financing early on (hopefully the CPA and lawyer can get creative and help us to circumvent that issue).

Fellow BP’ers –

I figured it was long overdue that I make an introduction here and establish myself as part of this great community. As for the formalities, my name is Brandon Hartman, I am 29 years old and I live in Columbus, OH. I am a graduate of The Ohio State University (focused in Finance and Economics) and I currently work as a Financial Analyst. I have formed a partnership with a current work colleague (age 25), @Brandon Rohrbach. He currently works as a Strategy/Finance Analyst and attended the University of Michigan (focused in Finance and Marketing).  Against my better judgement as a Buckeye I decided that he, even as a Wolverine, would be a great business partner. After a few rounds of writing business plans and performing deep dive market research with the intentions of spinning up a startup together, by chance we discovered that we both share a great love and interest for Real Estate. From that point on, it was decided -- Real Estate was our play and now was a better time than ever to get started (isn’t it always!?)

By nature I am a perfectionist with a strong desire to be the best in anything I do. As a result of this personality trait (flaw?), I am very willing and able to maintain focus and work hard to achieve that greatness. Over the last 3 months, I am proud to say that I have made respectable progress in terms of laying a solid foundation for my REI career outside of my long work weeks. I've started a personal budget, began putting 25% of my W2 income into a savings account and read numerous books, including: Rich Dad Poor Dad, Think and Grow Rich, The Richest Man in Babylon, The Millionaire Real Estate Investor, ABCs of Real Estate, Go Pro, Lean Startup and I am currently in progress of finishing both of J Scott's books and The Book on Investing In Real Estate with No (and Low) Money Down. There are plenty more lined up in my queue and suggestions on "must reads" are always welcomed! I've also listened to many of the BP Podcasts and intend to finish them all. I've read many, many blog posts here too. All of this has served to help me gain the crucial beginners knowledge I was seeking. Still, I know that I have much to learn. While I am proud of the initial progress I have made, I realize that those who become great were more often than not guided and mentored by those that were great before them. That is where BP comes in, and I am excited that there is an even greater opportunity to achieve a steep learning curve within this great community.

Currently, my partner and I are working on numerous action items. At the forefront of our "to do list" is finding a local CPA and working with them and our lawyer to get a business entity established. We are working through the typical challenges of deciding if we should form an LLC, a Partnership, or something else. I've got plenty of questions for the resident experts here on these issues and many others, but I will leave those for other threads. Our next steps include networking at any local REIA meetings we can find, assembling a team, spending plenty of timing reading/listening on BP, and getting our feet on the group to identify and begin to become experts on our market/sub-market. We intend to purchase our first duplex by the end of September 2015.

As for our goals, we have set detailed goals for ourselves. They are admittedly very lofty goals.  The goal statements themselves are quite detailed but I will spare you the details and just give you the high level summary: Our 5 year goal is to have a combined Real Estate net worth of $1.5M+ through B&H multi-family residential and commercial investments. Our 10 year goals are much, much loftier (including large commercial developments, etc.) With the knowledge and wisdom that is available here at BP and the guidance/coaching of experienced investors that I hope to establish relationships with along the way, I have no worries about falling short of our goals.

Thank you for reading and I look forward to reading of your many successes and interacting with you all for many years to come here on BP. Cheers!