I’m new to the residential business. I currently own 1/3 of my families commercial real estate holdings. IT generates about 1000.00 a month for me. It is debt free. I can certainly afford to get into the residential business but want to make sure I do it the right way.
What is your opinion on partners? I have a good friend who is a VERY hard worker and is very handy.
He has some money and can probably qualify for plenty of money to get us started. I have the financing leverage and the “money sense” but I work a lot and don’t have a ton of time to spend getting houses ready.
Going into business with friends is the 100%, absolute, gauranteed way of loosing your friendship. Same with family. I’ve done it and will never do it again.
I agree with the previous two posts to an extent. On the optomistic side, it can be done, but communication is the most important thing. You have to be on the EXACT same page on your business plan. Make sure you have everything on paper, ex: who is bringing what to the table and how you share the profits. nothing personal, just business.
its adds a certain dimension of complexity. you really need to look at what each party bring to the table and their outlook. Perhaps one the trickiest things is for long term deals is people outlooks, exit strategy changes and one partner wants an early exit. The other thing that frequently happens is one partner will start to feel like they are not getting their fair share; this frequently happens if you have one perosn doing the work and one perosn putting up the money.
I only do partners on short-term flips and I’m very, very selective about who I do it with. Plus, I have very elaborate paperwork that spells everything out.
I agree with aak54,
Very clear rules of engagement. Work on a per deal basis. Have a very clear entrance and exit strtegy for you first project, expenses, time line for rehab. and check out your partners life situation to see that what he is bringing to the table can realistically be done by him at the agreed upon time/money frame work. I have used a money partner who sits behind a desk, I do all the work he recieved a cut at sale date. We have worked together on many deals successfully, with very clear guidlines. I supplied the prospective property, rehab costs plus sales and holding costs,managed/did all the rehab within budget, showed who the market team would be , negotiated and manage the purchase thru sale then split profit at closing. He did not want any thing to do with the deals till closing and recieving his profit … It still works good today. Key being we both do what we say we are going to do, period. Darin