All Forum Posts by: Laura Chevalier

Hey @Kevin Scott! I'm curious if you ended up finding a property and a property management company in the Adirondacks, and if so do you have any learnings you can share? I'm just beginning to explore the same but am operating with similar constraints (i.e. living 3-4 hours away).

I'm preparing to do a full renovation of my tiny (<40 sqft) kitchen and have reached out to a few General Contractors who were referred to me. One of them already came on site and separately had an electrician come on site to scope the renovation we discussed – both without fees. A different GC is telling me that they charge a $200 fee for a site visit to discuss options and start planning the renovation. 

What's normal when it comes to GC site visit fees? Does it just depend on the GC and the project size, or is it a red flag for a contractor to ask for a site visit fee (or to not...)?

Thanks @Basit Siddiqi, I appreciate the advice! I do know Mike personally, and we've altered the agreement based on the feedback others provided earlier (see my last comment). 

Regardless, I see this as a learning opportunity (Mike and I both do), and we're trying to get it as "right" as possible this time so that we can continue to partner without having to make too many changes to the basic structure of the agreement. All the input from the community has helped immensely.  

Thanks @David M. and @Kamil Baldyga for your input! 

I think we're going to end up doing an equity split that's in line with the initial contribution, where expenses come out of the company's account, and he will be paid a property management fee. As Dan noted, the 50/50 cashflow already accounts for his expertise and up-front legwork. He will also have the ability to buy additional equity from me on an annual basis, up to the amount he earned in property management fees, for the first n years (n TBD).

@Kamil Baldyga meant to tag you for my question to you above, oops.

If others have different approaches, I'd love to hear them. I've seen a lot of people on here doing what Kamil describes, but I'm curious what's worked for others. Or if anyone has comments on the original approach I outlined, that would be much appreciated!

Thanks again Kamil! Follow-up question on that: how do you handle expenses like repairs? Does each partner contribute the same percent as the initial contribution? Or if not, how does that factor into the agreement?

@Kamil Baldyga thanks for your input! Yes we are doing this through an LLC; we're trying to figure this piece out so we can put it into the operating agreement.

I've heard of these "most common" approaches, but neither seems to apply for our situation. The second is closer, but what's your thought on how it could be modified to account for the fact of Mike having done more of the upfront work and taking on property management responsibilities for the first few years or so? This approach also assumes that we would be splitting all expenses 80/20, which in theory we could do, but the plan was to split ongoing expenses (including loan repayment) 50/50. Given that, is there anything you could suggest to amend the second approach you outlined? Or is there anything you would suggest to change about the approach I outlined in my original post, rather than replacing it entirely with one of these other approaches? Appreciate your thoughts!

I am going in on a 3-unit house with my investing partner, Mike, and we are trying to solidify an agreement for equity given what each of us is putting into the investment and the fact that we plan to split monthly expenses and cashflow 50/50. Do you see anything wrong with our approach? Or have any thoughts/suggestions?

Context:

Initial investment: 80% Me | 20% Mike 

Monthly expenses: 50% Me | 50% Mike

Monthly cashflow: 50% Me | 50% Mike

Mike found the property, scheduled a tour, coordinated with agents and lenders, arranged the inspection, and will be the Property Manager for at least the first few years. He is also the more knowledgable and more networked real estate investor between us. This is his second investment property.

I am providing the majority of the funds and have been in communication with all of our contacts, and plan to take on minimal property management responsibilities from a distance, mainly for the learning experience. I've also been leading the charge on the Operating Agreement for our eventual LLC. This is my first investment property.

Proposed agreement:

• (1) Start at equity split 75% Me | 25% Mike 
  • Gives Mike an extra 5% equity from the start for his experience and the initial arrangements he made with agents and inspector
• (2) Stay at 75/25 split until 75% equity gives me at least the 80% initial amount I put in 
  • e.g. Equity split stays at 75/25 for 5 years, if (75% of the equity after 5 years) = (80% of the starting equity)
• (3) After we reach the point where I get out what I put in (2), all gains in equity will be split evenly between the two of us
  • e.g. if total equity is $100,000 after (2), and a month later it's $101,000, the increase in equity was $1,000, so Mike's total equity and my total equity each increase by $500

This approach makes sense to us both, but having minimal experience in comparison to many of you on BiggerPockets, we thought we'd better sanity check ourselves here. Feedback appreciated!