All Forum Posts by: Chris Jensen

@Ryan Bosetti our operating agreement outlines each partner's core responsibilities. My partner's core focus is the rehab, since that's where is background and skill set lies. My core responsibility is aligned with my background and expertise as well... finance, taxes, insurance, and legal.

We work together on deal prospecting and acquisition and coming up with the overall design and rehab plan for the property. Then I try to stay out of his way while he manages the rehab. We have regular updates/discussions as the project progresses. I'll stop by periodically to see how things are going, but otherwise my involvement is fairly passive unless I have a major concern.

Among the things listed, I handle all the finances. I run the modeling and deal analysis. I keep the books. I manage the relationships and activity with the financing companies. I provide regular financial status reports as the project progresses, along with final results after the project is completed.

Once the rehab is complete, we work together on staging and marketing, along with any repair items coming out of the inspections, and anything else required to take us through to closing.

My wife and I have owned and self-managed rentals for several years, and we want to eventually expand into multi-family units. We view rehabbing as a way to accumulate the additional capital and expertise needed. We were originally planning to go it alone, hire the contractors, and manage the rehab ourselves. But honestly I was overwhelmed at the expected time commitment. I have a demanding full-time job, a large family, and I'm very active in serving in my church. My available time for managing rehabbing projects is not conducive. So the partner request from our now GC friend was very timely. We do still leave the go-it-alone option on the table in case conditions change with my partner.

You might be in a different position. If you have the time, basic knowledge, and financial resources, you might consider cutting your teeth on a small project. The knowledge part is huge, because there's a hundred different things that can go wrong during a rehab. Definitely not for the faint of heart. A partner with experience is the easiest way to start down that path until your own experience and confidence grows.

Hopefully that's what you were looking for. Let me know otherwise.

@Ryan Bosetti I'm in this exact situation right now. A local GC contacted me and asked if I'd be interested in partnering up to rehab homes. After meeting him, seeing his work and getting to know him a little I decided to try one project and see how it goes. We compiled a partnership agreement setting forth, among other things, that I would acquire the properties in my name and he would manage the rehab. Profits would be split 50/50. We actually did 3 properties that way, then we decided to form an LLC together. My RE attorney helped us compile an operating agreement with many of the same clauses as our original partnership agreement. Two things I've made certain the entire time is that: 1) I retain management control over the assets since it's all my money, and 2) I have the right to be as passive or active as I want... again because it's all my money and I have a better business background than my partner. It's been a good partnership thus far but certainly not without its challenges. Much like any relationship. Hope that helps. Feel free to reach out with other questions. Best of luck to you!

Chris

@Ahmed Nijim as a newer rehabber I've purchased a number of auction and foreclosure properties, but I never consider occupied properties because I don't want to deal with the hassle of evicting the current occupants. I can't help you with a good eviction attorney, but I thought I'd give you a little idea to consider. If you can figure out an effective process for clearing out occupants from auction purchases, this could become a niche for you. Where all the people like me avoid those properties, you could go in, apply your process, and have a nice source of deals. Best of luck to you!

@Thomas S. thanks for the reminders on the ways single family properties are different than multi units. There's definitely a reason why there's so much talk about multi family housing. Tweetable quote: "Cash not earning its keep is not acceptable." Nice!

@Tiffany U. interesting strategy, and one that I'm sure many of us wish we were in a position to follow. I would love to be all cash every time, but limited funds immediately puts a break on that strategy. I'd be curious to hear how you're able to do this?

@Llewelyn A. great post. Excellent comments about cycles and understanding what drives them, their consequences, and the opportunities that they afford. Sounds like you took a very measured, business-like approach to your real estate investing. Key take-away for me is to focus on neighborhoods where the RE business cycle is inclined upward, and then take steps to prepare for ups and downs on that cycle. Awesome advice, thanks for sharing with us!

@Corby Goade, great comments about what we should all be doing now to be prepared. And to your point, these are things we should be doing regardless if/when a downturn occurs. Just smart things we should be doing all the time. Thanks for contributing.

@Jim K. awesome post.  My two main takeaways: 1) if you play with fire you will get burned, and 2) debt is your best friend and your worst enemy.  Thanks for sharing your perspectives.

@Jeff C., excellent points. Very prudent reminders and cautions. A lot of people are drinking the kool-aid right now.

@Benjamin Haberman, I'd do some market research on other recent sales in that area and compare with similar sales outside that neighborhood. People are buying there, so it would be helpful to get a feel for what the "flood zone penalty" is. Then make sure to factor that penalty into your rehab plan to leave wiggle room in your profit estimate. Just an idea. Good luck!

@Frank Wolter that's very interesting. "Those were my best times" yes, that does sound crazy. But it also sounds like you were very smart with your money, such that when deals were plentiful you were in a strong position. Great thoughts, thanks for sharing.

@David Medina there's a lot of great advice in this thread addressing how you might get started. The question that comes to mind as I think about your situation is if you should get started right now.

Your very high debt level puts you in a very precarious position, and you have many people depending on you right now. Believe me, I can understand the responsibility you feel (I'm the sole income for my family of 6 daughters). Real estate is very risky, and that risk is more heightened given where we're at in the economic cycle. I'd hate for you to take on a lot more risk right now given your current financial situation.

If you're already making good money, then maybe it would make more sense to double down on your cost structure and focus all your effort and extra income to your debt load. Not only will that put your family's finances in a stronger position, but it will put you in a better situation with traditional real estate financing companies when you're ready to dive into real estate.

I don't want to be a buzz kill, just thought I'd offer another perspective. Hope there's a nugget or two in there that can help. Best of luck whichever path you take. I'm rooting for you!

Chris