All Forum Posts by: Russ Marlborough

I’m buying a property with a friend. We are paying cash and are going to rehab it. Once the rehab is done we plan to rent it out and refinance it to pull our cash back out.

My partner and I are splitting the deal 5050. We are both experienced real estate investors with different areas of expertise. He is a flipper where I am a more experienced landlord and buy and hold investor. We are both looking to learn from one another in the deal and make some money at the same time.

My question is should I set up an LLC or an LLP for the purchase? And can my existing LLC be the half owner of that new LLP or LLC?

Thanks for the help!!

@Matt Hurley This deal is not a fix and flip. The Property is fully rented at current market rents. There is very minimal work to be done here to the property other than the property management which I handle. The LLC part of it is tricky because my partner is getting a loan in his name for the property. So it will be in his name in the beginning until we can safely transfer it to an LLC with no due on sale clause worries.

What percentage of a deal is fair for me to ask for when I bring a good cash flowing deal to the table? The deal is a 6 unit that makes $275 CASH FLOW per unit per month.

I have partnered with someone to buy real estate for multiple reasons, one being I am financially tapped out loan wise.

We never discussed a percentage each partner will get for what they are bringing to the table. My partner is an out of town investor with deeper pockets than mine. We own two units together currently and split the first deal 50/50. I found both deals driving for dollars and fostered the relationship and did the negotiating for both deals in a market that is difficult to find cash flowing rental properties. I am not sure what to ask for as a cut of the deal but I know from listening to BP that the work I have done is worth something. Once purchased I will also be the boots on the ground/ property manager. Any rule of thumb for what I should ask for percentage wise when I'm bringing two sides of the "deal delta" to the table (Hustle, Knowledge) and my partner is bringing 100% of the financing. 

I am going to be expected to forgo my property management fee if the covid-19 causes tenants to have trouble paying rent with the understanding I am a partial owner of the property. The money I make property managing is supposed to be recycled back into the deal till I meet 50% ownership, But if i am having to manage for free during this pandemic it will severely deter the funds i have to invest back into the deal.

Really need some guidance on how to structure a partnership in this property. I want this to be a win for both of us.

Thanks for the Help!

What percentage of a deal is fair for me to ask for when I bring a good cash flowing deal to the table? The deal is a 6 unit that makes $275 CASH FLOW per unit per month.

I have partnered with someone to buy real estate for multiple reasons, one being I am financially tapped out loan wise. 

We never discussed a percentage each partner will get for what they are bringing to the table. My partner is an out of town investor with deeper pockets than mine. We own two units together currently and split the first deal 50/50. I found both deals driving for dollars and fostered the relationship and did the negotiating for both deals in a market that is difficult to find cash flowing rental properties. I am not sure what to ask for as a cut of the deal but I know from listening to BP that the work I have done is worth something. Once purchased I will also be the boots on the ground/ property manager. Any rule of thumb for what I should ask for percentage wise when I'm bringing two sides of the deal delta to the table (Hustle, Knowledge) and my partner is bringing 100% of the financing.

I want this to be a win for both of us.

Thanks for the Help!

I have recently doubled my rental units from 2 to 4 and am in negotiations for another 6 units. Im trying to be a little proactive and find out what software investors are using for basic property management tools, mostly task management. Are buildium and appfolio my best options? I just dont want to spend a ton of money for software above and beyond what I need. Maybe all I need is a to do list app.

Any Recommendations?

I have been investing here in Martin County since 2013 and have lived here since my parents brought us here in 1994. I can't say enough good things about the Hobe Sound/ Stuart/ Palm City/ Jensen Beach areas. I own a hand full of units that I rent long term. I have not jumped into the short term rental space but it intrigues me. That being said, I have done a bit of research and have some buddies that have short term rentals and love it. I would just be sure you understand the tax ramifications of the short vs long term rentals as well as the more intensive management and fees that go along with it (Cleaning, repairs, listing the rentals, etc.) The money you can bring in from short term is most offend times greater than the long term rental numbers but it is most definitely more work. If the numbers make sense to you and you can handle or pass the management off to a someone else, then I say go for it! And hey if you start with short term rentals and decide it isn't for you, its not like you have someone in a unit not willing to leave. You can make the adjustment and proceed with long term rentals. Hope this helps.

First off all of this advice is GOLD! Thank you all for your help.

I will elaborate a little as I have been asked to do. 

The deal came up driving for dollars and was an off market deal (the owner had no plan to sell until i contacted him and started talking numbers).

The deal: 150K Cash. I had a 15 day period to do my due diligence verifying all income and expenses and to have any necessary inspections completed. 

At the end of my Due diligence period i had to put up the 13k deposit for earnest money (None Refundable if i back out for any reason after the Due Dil Period, which has already passed). The inspections and attorney fees are adding up to the additional 2k, totaling 15k of costs i have sunk into the deal at the moment. I am using a attorney to handle the Deal and he recommended (after the due dil period had passed) that if I was planning on refinancing after closing the property with cash, that i could "double close" on closing day and close the financing at the same table. This would save me money and time if i was to go back and do a cash out refinance at a later date. This sent me on the hunt for a lender and ultimately led to the property being appraised as you all know is standard for all Institutional loans. Zillow, RPR, Redfin all had the property's estimate far above 150k. Estimates came in Any where From 167K - 225k, so it never occurred to me that it might not appraise. 

SURPRISE!!!!! Property ended up appraising for 120k. I called the owner begging and pleading to renegotiate but had no luck. The owner was not interested in renegotiating as im sure he realized it wouldn't benefit him (he could just walk with my deposit and keep the cash flowing property). I mentioned earlier that the owner had no plan to sell the property, so the threat of walking away from the deal hoping he would come crawling back was slim. He would not be listing the property after i walked and wouldn't be presenting the low appraisal to the next unsuspecting victim. Damn!

I was stuck.

I Took some deep breaths, I ran the new numbers and posted to Bigger Pockets to see if i was overlooking anything. 

I got to thinking that my original deal was all cash and it worked, so why am i worried?
The numbers are still great and reading through the comments of this thread have settled my nerves. As many of you have pointed out the appraisal is just an opinion and only something i would need to worry about if i am planning on selling. This is a fantastic property that cash flows like a boss in an area that is starting to see some appreciation and will certainly see more in the years to come. I plan to hold this property for a long time.

As of now i am moving forward and am set to close in 2 days.

Thanks again to all of you!

I am suppose to close this week on a duplex that didn’t appraise. The Purchase price is 150k and it appraised at 120k. I am locked in due to various circumstances and will loose my 13k deposit plus miscellaneous inspection and other costs totaling around 15k.

Crazy thing is The cash flow of the property is still outstanding.

Owner will not budge on price due to the income the property throws off. It Makes 1900 per month.

Do I walk away from this deal and forfeit the money I have put out for deposit and miscellaneous expenses or do I take the appraisal on the chin and take over this property in the negative?

Thanks for the help!

Russ

@Alex Verdugo Its a little Funny but your not an idiot, It happens to the best of us! Thats why we come here to help each other out. Good luck with your deal!

Thanks @Caleb Heimsoth! Leases are month to month and the tenants have been there a long time.