All Forum Posts by: Michael G.

Not really accurate though. All 3 partners would be going on the mortgage to secure the bulk of the financing. If we were to walk away we all take the credit hit so we all have a lot to lose really.

Additionally, time IS money. It sounds like a load of BS but it's true, my time is worth a good bit actually. Walking away from something I have invested that much time into isn't us "only losing our time." If our time wasn't important why wouldn't the partner putting up the money just do it himself without us?

J and replied at the same time... I guess that's the industry standard. We have never worked with a partner in this manner before (again we typically use hard money lenders who we buy out after a few years).

Interesting, thanks for the reply Al.

Well, I guess that was sort of what I expected but it feels out of balance a little.

2 people would be doing the lion's share of the work (and no matter what anyone says there is work involved with rentals, bookkeeping, tenant turnover, rental deposits, unit maintenance, etc). Seems like a lot of work to give up 50% of the profits for a partner that is only providing $40k or so up front.

But I agree, 50/50 could be what is expected in the industry.

Anyone else have a take?

Thanks again Al.

Hi all

After a pretty successful growth period, my business partner and I have have been approached by a number of people who are interested in partnering on some larger projects.

We are looking at a 6 unit building now and my question is, what is a fair split between 3 partners on a project?

1 partner would be silent and would provide funding for closing etc. The other 2 partners would be actively managing all aspects of the property (maintenance, tenant issues, etc).

What's the typical / fair profit split in this situation for all parties?

Thanks in advance

Thanks again man. Very cool.

Great Bryan, thanks so much for your help.

So, to be honest with you... I have worked in the computer industry for 2 decades now and the Bigger Pockets forum confuses the heck out of me...

: )

What is the best forum to start reading up on some of the things you are talking about on the larger buildings?

Thanks again for all your help.

Based on some of the replies I think there is some confusion here.

My business partner and I own a number of properties already with our existing LLC. In a typical year we are doing about 5 homes.

Properties are purchased needing $20 - $30k worth of rehab. Outside of the occasional flip, we rent the properties out as long term buy and hold.

This business plan has been pretty successive and we wish to continue working down this path but as we enter the next phase of our business we want to branch out to larger buy and hold buildings as well.

The outside people that I know of don't want ANYTHING to do with doing rehab work or long term buy and hold properties. They have some liquid capital and they know that my real estate stuff is going pretty well so they want to use their cash in another asset class for their own growth strategy.

I happen to have money that I can put towards funding but not enough to purchase the larger properties my existing business partner and I are targeting so I would be part of both groups.

In short my existing business partner and I do not want to sell out our already successful business and the outside folks don't want anything to do with long term property ownership.

Maybe it sounds unduly complicated but we need to keep the funding folks at arms length from the meat and bones part of the business. This is at the wish of ALL parties involved.

To me the only way to do this is to set up some sort of outside group for funding, sounds like a JV might be the best bet. I am meeting with our attorney later this week but I think I have a little idea of the questions I need to ask now.

Thanks

Hi Bryan

Now that's the sort of info I was looking for. Big thanks.

So, my questions....

1. Do all the members of the funding LLC / JV need to put in the same amount? If not then I assume they get back a %, say, 11% on their amount of involvement. Is it legal to even stipulate a return on investment like that in the first place?

2. How do we firewall someone from taking 1/3 of the JV profits if they put in less than 1/3 into the JV? I assume this is possible and probably not something we are worried about but I am interested in hearing if it is possible.

3. Could a 4th member join at a later date? They would have to have equal voting rights as well I assume but would the original 3 partners have to sell shares or something?

4. If one of the original 3 members decided to leave the JV could they do that without risk to themselves? Or without risk to the JV as a whole?

4. How do the partners get their money back out? Is there a limit to the length of time on the partnership or do the members have to vote to dissolve the JV?

5. If we were to do multiple deals would one JV work or would there be a separate JV for each project?

These are all questions I am going to ask our attorney (plus many many more) but we are going to pay for the answers so I want to have a general direction to start down before I strike up that discussion.

Thanks

Ahhhhh... *slaps head*

LOL

Thanks, yeah got it.

And yes, that does sound like the right approach here.

Thanks Bryan.... but I think you are assuming that I am trying to avoid doing things the "right way"..... that COULD NOT be further from the truth.

Frankly I don't have any idea what the "right way" is. I have read a lot of threads on this forum before and after I posted the original topic but nothing really seems to answer my specific question (possibly I am not good at searching).

I see the letters "JV" posted on a lot threads but frankly I don't know what that stands for (when someone tells me I am sure it is going to be a slap on the forehead moment). *smiles*

That seems like the best solution to me because a voting system would provide a level of confidence for the other members involved.

All I want to accomplish is a way to leverage capital from a very small pool of outside business partners (2 to be exact) along with my own money to start making larger purchases on apartment complexes.

I want to do that legally, ethically and in such a way that it provides some measure of security for my existing company while providing some financial incentives and a level of security for other partners to join.

Again, I am NOT trying to do things the wrong way (as you seem to imply). In fact, not only do I not know what the "right way" is, I am not even sure if there is a way to do what I want to do at all.