All Forum Posts by: Yents Ybrimovic

@Drew Sygit

Yeah, specifically in my case I probably wouldn't have even looked into real estate as an option right now if 50/50ing costs/work never came up. We have some meetings coming up in a couple days with lawyers and banks so hopefully it goes well. Even if it doesn't it'll all be good experience, thanks for the advice!

Quote from @Brie Schmidt:

@Yents Ybrimovic A few things...

* FHA loans require both parties to owner occupy for 1 year

* A 203k loan is not a first time buyer program, you can own a home and still use the program as long as you live there

* The loan must be made to a person, not an entity.  So you could form a partnership but it would not be allowed to purchase the property, so you will not be fully protected legally

Thanks for clarifying that they're not a first time buyer program, I am not sure why I had that confused. So if the partnership would not be allowed to purchase the entity together and I were to buy it, if we were to force our way down this road, would be to set up a legal agreement beforehand, I would buy the property since a partnership can not, and then the exchange for  ($$ + assigned roles + etc), my partner receives 50% equity?

Quote from @Drew Sygit:

@Yents Ybrimovic If the 203k loan only requires 3.5% down and you can finance all the repairs in the loan - then what exactly is your friend contributing?

He can't loan you any part of the 3.5% down and you can get seller contributions to cover closing costs, etc.

Just food for thought...

 I completely agree with your implied notion that if I were going to do this, it would absolutely be more beneficial to do it myself especially with an insignificant down payment like 3.5%. I was just trying to explore the option of doing it as a joint venture, if me and my friend buy this first rental property and it runs smooth it could always turn into more, bigger properties. More specifically, we both come across tens of thousands of dollars within the same 3 month stretches due to what we do for work. So as investing partners it makes sense because we will both have extra cash at the same time, we partner up to cut the risk in half + we both specialize in a couple things the other does not in terms of being a rental property owner (e.g. running the books + marketing vs actually fixing things). 

 I'll start more seriously considering doing this specific idea as a solo venture though, because that seems to be the general consensus of everyone that replied haha! Thanks for the response

@Andrew Slezak You completely made up the idea of giving eachother money without legal documents in place. There is no situation being forced. We are both at a point where we are 25-26, I make 80k-100k/yr and he makes from 160k-200k. We are expanding our investment horizons into a real estate property. Where we live housing prices are relatively cheap compared to if the house was in a different location. I'm talking 50k-100k discount just because of where we live. Small college town, 10k-30k people, anywhere from 80k-160k will get you a nice 3 bed 1 bath house. Rent is upwards of 1500/month for these 3 bed 1 bath. There are duplexes being sold on the mid - upper range of that price bracket, that need a little work. My idea is that if we were to be spending that money anyways, it is smart to at least explore ideas such as this where we can double the income from having 2/3/4 doors. Less money down means more money to invest elsewhere or just have in savings as backup. We will have a partnership and operating agreement set up. We will be splitting all costs 50/50. We are looking into houses on the lower end of the scale at first to get started for a "low risk" (we could pay mortgage out of pocket no problem even if property is vacant for 30 years) house that will give us the experience we need as rental home landlords - and I am looking down the road at potential investment ideas to keep this thing rolling. Now that I have explained all of this to you, is there any chance you have an answer to the question I asked?

I am not really a real estate finance guy - I am an equity research finance guy, but I was under the assumption 7% mortgage rate was average. Even if it's not, nobody said anything about forcing a situation and everything can be refinanced later? If the deal is profitable and meets the criteria we are looking for, then it doesn't matter if it's at 7% (an average number, by the way) because it can get refinanced later and it is still profitable today.  

We are creating our partnership, getting approved for a mortgage, and then putting in offers on specific properties we like based on the analysis. They might be 20% below asking.. but there's a price that makes just about any property worth it. You know that though. 

@Nicholas L.

I'm recieving the exact 1:1 in equity.. I would just be spending half as much and getting half as much equity. With half the risk. 

Me and my partner both bring things to the table that the others don't. I have a background in finance for deal analysis/keeping finances in order. I have tons of connections with people who do marketing all over the city I live in. My friend knows just about every contractor within 2 hours of us and can likely fix small problems that come up. I work/travel for 6 months out of the year, so I am off for 6 months and working 12s for 6 months. I would be able to manage the finances, marketing and showings even while working but maybe not attend to the small stuff such as getting a random call to fix something stupid at 3pm when I'm 6 hours out of town or on my 30th day of night shift 12s. 

I am more than willing to do something like this on my own in the next couple of years when I am ready but we are looking to get started now. We will buy a single family house like I talked about and then analyze other deals. I just do not want to take this possibility off the table if it could help us really get moving in terms of number of doors we have rented out (a 2/3/4 door rental is an exponential increase in our cash flow, compared to the single family home we are planning to buy first). 

If I uncomplicated the situation a little, do you have any advice on how we could make something like that work?

Quote from @Nicholas L.:

@Yents Ybrimovic

hi - way too complicated when you're just starting out

just save up enough to do your own house hack

good luck

 Yeah we are planning on buying a single family town house to test the waters and then I was exploring potential profitable avenues down the road and this is one of them. I think there is almost no reason for you to say that it is too complicated when something like a 203k loan can get me a multi family house for a lower interest rate and lower down payment while still being cash flow positive. I think dismissing potential ideas on the basis of them being too complicated is an awful mentality and I would rather know exactly why it wouldn't work or a path that would make it work and then decide for ourselves if it's worth it or not based on the steps it would take. I appreciate the response and advice though, thank you sir

Hey guys, me and a buddy are looking into get started into investing in rentals, as 50/50 partners.

My friend owns a house. I do not. If we were to find a duplex/triplex/fourplex that met our criteria, I was thinking about maybe owner occupying one of the units in exchange for being able to use the 203k loan - for not only cheaper financing but 3.5% down + being able to include fixup costs in the mortgage. Is there a way to structure something like this, where my partner could be in on this too?

We are planning on getting a partnership formed and just 50/50ing the down payment to assign 50%/50% equity on potential houses while dividing up roles. How would we format something like this if I were to use my option of a 203k loan (which he doesnt have this option because he owns a house and wouldnt owner occupy what we buy),  Is it possible to do it as a joint venture? do i sell him 50% equity in the house in exchange for services? what would we do