All Forum Posts by: Drew Berman

Hello All!

My business partner and I have established an LLC and purchased 3 rentals (10 units) over the past 18 months. Everything is going well though we have not established an actual written partnership agreement. What are some things I should put in or be thinking about? My main concern is my partner is older, and much wealthier then I, and we have completely different personal situations. I want to hold these and future purchases long term 20+ years and protect myself from a potential situation where he wants out and I am trying to buy out something I cant afford, and forced into selling what I have worked hard to obtain! Any help / guidance / food for thought is appreciated (aside from should of written up agreement in the beginning lol)

Thanks
 

@Richard Graf that’s perfect! You aren’t dealing with a bank so EVERYTHING is negotiable.  Figure out his needs and wants and then you can align your deal/offer to be mutually beneficial.  

Hey Rich!

Congrats on our deal! I would first consider the reserves you have for your personal expenses as well as your new business expenses (which many might be unforeseen) before considering scaling.

You said this is a seller finance deal, is it possible to negotiate with your seller or have you already committed to the terms?  Everything is negotiable with seller finance, maybe your seller is willing to give you a low or no down payment arrangement in exchange for a higher rate or shorter term? Or deferred payments/interest only? If the deal still works This may be a way to preserve your capital to put toward the next deal. With no bank involved the terms of the structure are dependent on your negotiation.

You may have equity in your home that you can use toward another purchase.  I would also consider a partnership with someone who may have what you need.  If capital is preventing you from moving forward maybe you can use your new experience in real estate to obtain an investor (friend/family/coworker whoever) to put down your down payment in exchange for an equity/profit split. you do all the management find the deal etc.     

There are plenty of people out there with plenty of money who need a place to park it.  Real estate is intriguing to many and has so much benefit as you know, but seems unachievable to some.  You now have some experience, I would suggest talking to who ever will listen about your real estate ventures and you may be talking to a future partner. 

Or continue to look for seller finance or other creative ways to find deals with no or low money down.

There are plenty of books on the subject, including some published by bigger pockets (under bookstore tab)  

Long story short, if you have the knowledge / find the deals / and can convince people to believe in you and your deal you will scale as fast as you want.

 I would say 6 months reserves of expenses is reasonable to start, I would also factor into your monthly expenses a monthly rent to put aside for capital expenditures (large price repairs roof, boiler, etc) if you intend to hold the asset for a long period of time it’s only reasonable to think you will at some point have to replace these things. 

On my first property I set up a seperate bank account deposited my reserves and all rent would go into the account. Everything gets paid out of the account but I never paid myself. The money stays in the account and pays for all the expenses when they come up. Eventually that money will contribute or pay for your next building (likely combined with additional capital or proceeds of appreciation depending on how quickly you want to scale.

I know for me when I made the decision to invest in real estate I wanted to take immediate action, but for me that action came in the form of analyzing deals, and reading books, listening to podcasts etc. Don’t force yourself into a bad deal but force yourself to understand what a good deal is and then go after it. 

Hey CJ sounds like your on the right track. In my opinion the first deal is pretty important and in my experience the hardest to acquire. After that first deal you learn the process and will naturally have more experience and become more comfortable. I spent a great deal of time educating myself and buying used books on eBay. I think these used books are really the best investment I ever made. I analyzed ALOT of deals to understand my market, and I made sure I had reasonable reserves. If you know what your looking for / have the capital & reserves / find the right deal then go for it!   In your position sounds like your job may expose you to potential partners with more experience. It may be advantageous to partner with someone who can guide you through your first deal.  

Hey BP Fam!

Need some support and guidance!  I  am under contract on my 2nd deal (5 unit which is eating up a good chunk of my capital)  Ind the midst of the 5 plex came across an off market duplex in the same area and started a seller finance conversation with the owner.  Initially he said he had a very small mortgage which wouldn't be an issue to pay off.  Now that we are talking numbers he likes everything but wants a larger down payment but below are my first two offers, im pretty uncomfortable with subject to (mostly because of lack of education) but im hoping somone else can see a different play to unlock this deal.  There is a great amount of cash flow and its in my target area.  

Offer 1: 

200K Purchase

5% down = 10K @ 5% interest amatorized over 30 years with baloon at 12. 

(monthly payment: 1019, total interest paid to seller 101K)

Offer 2 (after request for larger down payment)

$207,500 purchase

$15,000 down @ 4.5% amatorized over 35 years baloon at 12

(monthly payment: 911 , total interest paid to seller 95K)

What say you?

@Kelly Coca wholesaling is not my niche, but the concepts are fairly simple. The key would be generating leads, if you can generate the leads you will be successful. 

I take ACH payment for no fee…

Hey Charlie,

I have found it is going to be difficult to just find someone to volunteer to spend their time to guide and mentor you or even just answer questions without figuring out first what you can provide for them or how you can provide value. I would suggest figuring out what traits you excel in or have, and apply those strengths to aspects of real estate, find a niche or a task that you can excel in and bring to a relationship. People want to network with other people who they deem as valuable.  They are seeking mutually beneficial relationships to invest time into.  So if I want to get the attention of a realtor I try and bring them business and people who may be looking to purchase or sell their home. I want to tell people what I can do for them instead of seeking what they can do for me.  

What are the questions you are asking? maybe together we can find a different way to ask the same question.  

Hey Kelly!

Welcome! and congrats on starting your journey.  The greatest advice/mentorship/guidance I received came from used books on eBay.  The first thing I did to start my journey was educate myself on real estate and understand everything I could.  Used books has turned out to be the best investment I ever made.  As I educated myself I hooked up with a realtor and learned the market I wanted to invest in.  The more familiar you become with your market the easier it will be to spot a deal and take action.