Hello,
I posted on another forum, but maybe this one is the right one.
I want to enter REI as a credit partner. My fico goes from 750 to 770. I cannot go full doc as i just started my own business (no RE related)
a few months ago. I have 10/20ks in my bank account. Ihave placed an ad looking for experienced REinvestor; now i have to choose one after getting many answers.
I would appreciate any input you may have about the best way to make some money as a credit partner and what i should do and more inportant what i should not do and be wary of, and how a partnership should work.
Thanks a lot for any input you may have.
Febus
As a credit partner your main concern is your CREDIT. You need to know going in, how the mortgage will be paid and assurance funds are always there to pay the mortgage while your in the middle of the deal, which is generally a rehab in a credit parternship. I would suggest having the money placed in a escrow account to cover 6months PITI and having the escrow agent pay the mortgage each month. Once your down to about 2months of escrow left, start talking about adding payments to the fund. Escrow agents are rather cheap for this and you will probably get a good deal using the closing agent for the mortgage as this person.
Also your partnership? Have it on paper how the split goes. When you do the closing they will ask as well so they have do the proper paperwork for the IRS. I recommend creating a company as well for your protection. I actually do this and place my share of the deal into my own LLC. Many times the other guy leaves it in his name his shares but when the home sells, I want my LLC to make the money.
Also since your credit partner, you get all the tax benifits such as interest/insurance deductions on your taxes and put it in writting still.
It may be best to consult an attorney that will probably charge you $250 to write up a legal contract for whoever you partner with detailing splits, benifits and protection for you just incase.
last…if your partnering up with a rehabber, make sure they have experience and ask for referrals. Call them as well. Tell him you like at least 5 to 10 referrals, ask for addresses of properties they rehabbed and go by them. Even know on door and ask to see inside, explain who you are and why you like to see inside of house and ask if they are happy with the work. SOme rehabbers can put the shell together nice, but what if they skim on things like wiring needed, plumbing, poor tile laying, etc.