All Forum Posts by: Dawn Curry

I know that it all needs to be discussed with the partner but let me throw some ideas out here.. do they sound unrealistic or reasonable to you (mind you, the investor wants to basically be a silent partner):

They get a % off the top of the preferred return. Then the rest of the cashflow is split 50/50. But since I would be the one managing, renovating, bookkeeping, etc. I would charge the LLC a PM fee.

If investor wants to sell out, I have full right to buy him out. But if not, all interest will transfer to the new person/entity, but they have no 'voting rights' since I didn't choose to partner with them.

As for renovations.. taken from 'cashflow account,' but if there are insufficient funds, investor would provide funds, which would increase his preferred return. For example, every additional $10k borrowed is another point added to his preferred return.

We have 15 doors right now - pretty much all of them were rehabbed prior to placing tenants. All the renovation costs came from us (either thru our own cash or financed thru a construction loan with a local bank).

A local investor has seen our success and approached us about wanting to be a 50/50 equity partner in future deals. Obviously, that would be fantastic. The investor would be the money and we would be the boots on the ground.

How would YOU structure this partnership?

I was thinking the investor would get a % from the top of the cashflow and then the remainder of the cashflow would be split 50/50. But since we are essentially the property managers, we would have to charge a fee to the LLC for that or the equity stake would change. But what would you do when renovations need to happen (I.e. new roof, heater, bathroom reno)? Where would you take that money from if there were 'insufficient funds' in the "cashflow account?"

@Austin Fruechting

~5 years later and studying this!

How did that partnership work out for you? Curious to see if after this time, would there be any tweaks you would make?

Inherited a property (6 units - 3 separate buildings that consist of a triplex, duplex & SFH) a few months back and we're currently renovating the property. We inherited 3 "tenants." We basically did cash for keys for 2 of the tenants although there were no "keys" - the place was boarded up soon thereafter. The 3rd "tenant" said they were looking for a place and when they did, they would take the cash and move.

Fast forward, they’re still there. Our lawyer said let’s try to take them to squatter court and of course, they got a pro bono lawyer to defend them. They claimed that if they get evicted, the wife, husband and 5 kids would be homeless as they have no place to go (mind you, we THINK this is a 2 bedroom unit - they haven’t allowed us access to the unit). Needless to say, the case got dismissed because they were “paying” tenants in the past since they provided a lease from 2017.

Now, DYFS is involved. They already took one kid away from them. Still haven’t been able to get inside, but to be honest, we haven’t really tried that hard since the first time we asked. Our lawyer then wrote up a month to month lease to provide for them. It’s an increase from their previous lease, but clearly identifies and pinpoints aspects of the lease that they are breaking. They just called saying they have the money and want to meet up to go over the lease and pay the rent so they aren’t late.

So based on this and say they continue to pay us, on what grounds do we have to evict? Any? Because they broke the lease of smoking in the unit (hard to prove) and that they have animals in the unit (is that enough)?

Just a reminder.. We are in NEW JERSEY. Pretend like this is January 1 (when the COVID moratorium expires).

@Michele B. No.. cash flow for purchasing one! Or do you use different criteria like Roi?

Just out of curiousity... what is your monthly cash flow requirement to even consider a stand alone commercial property? Or for commercial properties.. do you base a different “criteria” to go by?

@Russell Brazil Low cap rates are correlated to low risk and vice versa. You’re saying because of low cap rates generally are homes in a hot market and are A properties whereas your more depressed properties typically have higher cap rates - tenants, property itself, neighborhood, etc?

@Russell Brazil Could you elaborate more on that please?

@Jay Hinrichs our first (and only) flip so far we made 60k gross

@Jacob Asay that book is on my list.. just haven’t gotten to it yet! I will definitely check out that article.... and much more! Thank you so much