All Forum Posts by: Otis Clayton

Quote from @Otis Clayton:

In my search for private money , I have heard there people use SDIRAs to fund real estate investments and be in the first position.

I wanted to know what are the pros and cons of using SDIRAs for fund Real estate?

Lots of people use checkbook SDIRA for private lending. In fact because an IRA kicks off UBIT on leveraged real estate many people opt for private lending until the account has enough to buy real estate in cash if that is their goal. 
If you’re just looking for money to fund deals and you’re thinking the source could be IRA money then it shouldn’t make too much a difference to you whether the investor uses their personal funds or IRA funds. Only caution is if they don’t have checkbook control and there’s a time crunch going through the custodian can cause delays and red tape to deal with.  

@Otis Clayton

We typically fund with a combination of Hard Money and Private Money. Hard Money will fund 90% of the purchase price and 100% of the rehab on a draw schedule. Our Private investors will fund the remaining 10% of the purchase price, the first portion of the rehab (to be drawn later from the HML), and the holding costs. Of course, with private lenders, you must give up equity or a return on the debt.

Quote from @Otis Clayton:

I am looking to partner with someone and when I find them , I wanted to know what is the best strategy to partner with them? What bylaws should I consider and what business strategy should we implement?

Hey Evan

I prefer hands off but I know that 2 heads are better than one. Additionally to that I am looking to expand into 3 other markets but I have boots on the ground in those areas. The challenge is being liquid enough for acquisition, marketing, and closing to hold these properties for 36 months minimum.

Thoughts on what is a fair partnership in this scenario?

Hi Otis, when partnering on real estate, it’s important to set clear roles, contributions, and profit splits upfront. An operating agreement is key to avoiding confusion, and working with a CPA or attorney can help protect both sides.

Are you looking for a passive partner or someone more hands-on?  

Hey @Otis Clayton,

Partnering can be a fantastic way to scale, but setting clear expectations upfront is key. Here’s a strategy:

1. Define Roles and Responsibilities: Agree on who handles what (e.g., funding, management, deal sourcing) based on strengths.
2. Bylaws to Include: Cover profit/loss splits, decision-making processes, buyout clauses, and what happens if the partnership ends. Clarity here avoids future disputes.
3. Business Strategy: Align on your goals—flipping vs. rentals, risk tolerance, and timelines. Are you scaling quickly or focusing on steady, long-term growth?

Evaluate forming an LLC to protect both parties and outline everything in an operating agreement. The right structure ensures a smooth, win-win partnership! Also, consider creating a JV agreement for the specific opportunity you and your new found partner decide to pursue!

Have you found someone yet?

It's really impossible to give you a direct answer on your question without knowing a lot more about your plans.  It's like asking someone what you should look for in a wife.

You need to focus on what your goals are first, then take a personal inventory of your own knowledge, skills, interests, finances, available time, etc.  After that, make a business plan to execute on your goals.  This will shine a light on the areas you have gaps. Then look for a partner or partners to fill in the gaps.