Long story short, I got out of RE investing because I had to finish school, and funds. Well I met an old CEO of a company I used to work for. He already bought one house, and is renting it out. He really doesnt know much about RE investing, but I do. I dont have much money, but he does.
He brought up the idea of us working together, and I would do the finding and negotiating and put in some of the money, and he would be providing most of the money and a couple small things. He doesnt have a lot of time because he is still a CEO, so it sounds like a good idea for us to work together.
What are the cons of creating our own little investing company together? Im just not sure how to split profit, as he would be using more of his money than I will be.
First, put everything in writing. If it’s not in writing it does not exist.
Next, what’s the investment strategy? Flip? Buy and rent? What’s the exit strategy? What’s the plan C exit strategy when A and B don’t work? How will profits be split? How will expenses be split if there’s no profit? What if the property needs more money? Who puts it in? How will this affect the profit/loss split? Who gets paid what for work on the property? Who has authority to spend money?
Who’s going to get what when one of you dies, gets sick or gets divorced? What happens when you don’t like each other any more? How will one partner buy out the other?
How will the endeavor be taxed? How will cashflow (different from income) be divided? Who’s going to go turn off the water at 3 am when the tenant calls?
Very well said mcwagner. Very thorough. My opinion of partners is that it should be one deal at a time. He puts up the money, you find the deals and do all the grunt work. If you have a money partner there is no reason to put up your own money if your the deal finder and doing all the work. I would try to get an upfront fee of a few grand for yourself or for marketing. Deduct all costs and split it down the middle. You could do a new LLC for every new deal so that your not tied to him long term or if you find a deal that you want to do yourself you won’t have to hear him complain about it later as long as its a new partnership for each new property. Try not to be stuck to him long term. Hopefully eventually you can work your way out of a partner and keep all the money and not have to answer to anyone. But don’t get me wrong, partners are great for those times when you find deals and have no capital or credit to get the deal done.