So, I’m here and I’ve been talking with a lot of people. I’ve also been playing with numbers and looking in a few different states. I really want to get into this industry, and I will; however, I am going to be short on a down.

How do partnerships work? I’m sure I will get many answers with this question, but I want to know why anyone would want to go into p-ship with someone that has no money down? I have great credit, I can get taxes done for free, I can afford some of the up front costs, but I don’t have large sums of money for a down payment.

Of all the things I just said, in my mind the down payment is everything. So, is that true? Do people go into p-ships with people that can’t afford a down payment? If so, how does that work? What, in general, would the person unable to put a down payment give?

Also, coming from a family that doesn’t invest and not knowing anyone in the business, how would I go about finding a partner that can invest?

I don’t like partnerships. My experience with partnerships is that I meet a lot of people who think we can be partners and by that they mean I can carry them on my back while they do nothing.

It’s very difficult to make a partnership work.

You have it wrong about the down payment being everything. The thing that is “everything” in real estate investing is excellent credit.

So, with that said… What can one give if they don’t have a down payment? I have a most excellent credit score. I don’t have a way to help with much of a down payment.

So what can I bring to the table for to someone that might have the financing I need?

Also, what do you mean that they think you can carry them?

I don’t know enough about how they are supposed to work, so I’m asking to get ideas. I’d like to find a partner that can help with the down payment. What else can I expect from them? What can they expect from me?

experience, contacts, sweat, legal knowledge, accounting/tax knowledge, construction knowledge, etc.

What are you strengths? What do you have that people with money don’t have? Some people have money to invest, but they don’t have the time to do the work. Maybe they are out of state and need a local contact.

My experience with newbies who want partners is that they expect the investor to do all the work and teach them, while they collect half the profit. They don’t bring anything of value. They have no experience. They have no money. They have no knowledge. Most of them just want a piece of the real estate riches they hear on the TV or read in the papers and have no idea the amount of work necessary to make it happen.

Partners compliment each other. They bring skills, experience, and/or contacts that the others lack. Most successful investors don’t need partners because they have everything they need. I have partnered with contractors in the past. I provide the business knowledge and they provide the work. We both provide capital.

Accounting/Tax = Yes (I can do them)

Experience in real estate investing = No

Time to look around, call, gather information, research online = Yes

Travel = Not during tax seasons

Newbie = Yes, with a strong desire to learn and actively participate with some guidance, if needed. I guess that’s where I fall short for the most part. Without experience, I’ll need a mentor. So, I guess it takes time to find that person willing to do that. Maybe I could take less than 50% profits until I learn more in future deals. Could that not be a payoff? Less profit for a little guidance? I’m pretty smart when it comes to finances, I have a Master’s degree in Finance and Econ. I’m great with numbers and figuring things out, I just may fall short with what exactly what I need to figure out or which questions to ask. That’s where the guidance comes in.

Contacts = None, right now! (Maybe 1). Never been in this field, but highly interested and motivated. Have read a lot, just no practical experience. Coming from a family that never invested, I am starting from ground zero. So far, my contacts are pretty much via emails with people I’ve been speaking with on the internet.

Up front costs = Yes, limited though for now.

Large down payment = Nope. Could equal less share in p-ship.

Credit score = among the best.

Those are my qualifications for now. Would any investor seriously partner up with me with my little experience? Can anyone help me see what I do have to offer someone that could supply the full down payment? I guess I’m feeling a bit small trying to get in without a large amount of funds.

The unfortunate things about partnerships is that most, not all, but most of them end up like the majority of partnerships do…badly!!! I have 2 partners and that’s all I need: the bank and uncle sam, and I can’t stand either of them. I come from a middle class family, didn’t have money to give me, had no experience in RE, but I got a job as a property/maintenance manager and read everything I could for about a year and then went on to start buying my own stuff. Just trying to let you know that it can be done because it sounds like you are in a similiar situation that I once was.

Couldn’t agree more. The thing about RE investing is that you need purchase power and in RE purchase power comes in the form of your credit score, but I would add that the ability to make good deals is paramount to achieving any sort of success. If you don’t have money to start off you’ve got to find someone to hold paper to get you going, this takes the ability to put together a good deal, plus a good credit score.

jbaldwin… that gives me hope. thanks for that. i do come from middle class and parents weren’t into investing. i, however, love reading things about it and love learning.

if the most important part is credit score, then i just have to find someone to take a chance with a lack of knowledge of actually running things. i really doubt i would make a bad decision when it comes to setting up a deal, as i’m pretty good with numbers and i would, of course, consult someone first.

You seem to be missing what everyone is trying to tell you: do not get embroiled in a partnership. No good will come of it.

You have good credit. You can borrow any money that you need. You do not need anyone to come in and take half your project because they have down payment money.

Knowledge is not locked away and available only to the select few that have the golden password. Knowledge about real estate is readily available and there are nice forums, just like this one, where people with experience share generously, and do not take half your profits for doing so.

With your good credit you can get 80-97% LTV for a commercial property, here’s the key when you have to ask someone to hold paper, or when you go into the bank, whichever. You’ve have to at least sound like you know what you’re talking about. You go in there with a bunch of ‘um’s’ and ‘well’s’ and ‘what if’s’ and you’re not going to sound like someone that they want to trust with their money. And that’s why I say to really read up and learn the lingo before you get involved in your first deal. Good luck, and stay away from partnering up.

hoyle73 = brianahoward

Okay, yeah, wasn’t getting that I shouldn’t get into a partnership. Thanks for speaking it clearly. Seriously, I wasn’t getting it.

Is “hold the paper” the same as owner financing or a version of it… Just someone that’s not a bank?

Maybe I could come up with 3% for an LTV of 97 depending on the price of a property. Much more than a price of $200k would be stretching for me right now unless I went to credit cards.

I need to set up a conversation with someone in this already to really get the terminology down. With all my questions and your responses, I’m getting educated. Yes, there is still a lot more I don’t know.

I have read so much, but when it comes right down to actually talking the deals and applying them, I’m sure it’s different. I did well in all my accounting classes and took and passed the CPA examinations the first time; however, when it came time to actually put all the information to use, it was still a bit confusing.

This is a great forum and I really appreciate all the responses and education that I’m getting here. It really helps.

Paper=Money. If you ask someone to hold $100,000 in paper, you’re asking them to owner finance $100,000. “Paper” sounds more sophisticated and quite frankly better than “Will you owner finance me xxxxxx?”

Those 97% deals are on owner occupied commercial deals. I wouldn’t even really consider that at this point in your investments. For what you’re wanting to do you you can get 80% at your local bank, a mortgage broker can get you 90% but the rate will be high making cash flow tough.

“Hold Paper”
“Hold Back xxxxx”
“Participate in the financing…”
all mean the same…When you’re getting into these deals though you have to consider the psychological impact of your words on the other party and it is my belief that any of these phrases sounds better than, “Will you owner finance me xxxx?”, don’t you think so?

Where do I get the other 10-20% if I don’t have the money saved up?

Are you reading our previous posts before you ask these new questions? If the bank will give you 80%, 20% has to come from somewhere. Seller can provide this, you can cross-collateralize other properties, etc. If you don’t have any othe assets to pledge then you’re probably going to have to hook up with a seller who will hold paper. Make sure and include your debt service to the seller in your cash flow projections. You go into a bank and ask for 80% and say the seller is holding 20% and forget to forecast the debt payments on that 20% they’re going to laugh.

I was understanding that I could do one, not both… either bank or owner. One of the reasons why is because I had a mortgage broker tell me that banks will not allow a loan if the other part (up to the 100%) was financed elsewhere.

Mortgage brokers typically can’t get their hands on a 100% CLTV product. The last broker I talked to could get a 80/15/5 but that still meant that you had to come up with 5%, and when you don’t have anything that’s obviously an issue. Of course you can do both, that’s how you get started if you don’t have any money. Your local bank(s) is/are your best bet if you’re going to be doing some seller financing (I suppose you can always do some stuff outside of closing if you use a broker but that’s a different story). But you’ve gotta make the numbers work. I just got a deal under contract today, let me give you some insight. Asking price was $580,000, I offered $495,000 (that’s 85% of the asking price but this is 4 properties making up a street that is zoned for commercial use, so I don’t want to piss off the seller with my typical 70-80% offer). Seller came back this morning with $509,000, I countered and settled at $504,000. I asked him to hold 20% and he said he didn’t want a 2nd position so he’s going to owner finance one of the properties to me and the bank will lend me capital for the other 3. 80% ($403,200) from the bank, 20% ($100,800) the seller will owner finance the one building to me for. Just some insight, but you’ve gotta get out there, once you have a foundation, and make offers. You never know who will hold paper and who won’t until you make the offer. Good luck.

Hoyle73 = brianahoward

Thanks for that. I needed to know that for some reason, it helped. I was talking to a friend just tonight telling her that I’m ready to just offer super low numbers. I know I won’t make a bad deal and I just decided that I will work out a 3-5 year projection to ensure there is a positive cash flow. With those numbers, I will make offers… just as soon as I have a better idea what I can actually get in terms of financing. If they accept, they accept. I was telling her tonight that you never know how desparate people are to get out. And you will never know until you make an offer. They will either accept or not accept.

What’s the technical difference between ‘owner finance’ and
‘hold’ if it’s still 20%? He’s still in it for 20%. Is the difference that you just kept the one building out of the financing with the bank?

There is no difference. Like I said earlier it sounds much better when making your offers and it sounds much better when approaching the bank, eventhough everyone know what’s going on. And yes the one building was kept out of the bank financing because that building he owns free and clear so he can take a lien in 1st position. The bank will take a 1st on the 3 properties, and then a second on the other 1. The bank is lending 80%, period. So the other 20% had to come from somewhere and he will not take a 2nd, so this is the solution we came up with.