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20 Unit Rental Investment With Partner

#1 User is offline   BAXENDELL 

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Posted 29 September 2010 - 07:55 AM

I have a chance to purchase a 20 unit apartment complex with a friend that has a good bit of money. I don't have any money but, would be doing the fixing up and managing of the property. How would I structure the deal that would be fair to me putting in the time and skills and him fronting the money? It would be approximately a $750,000 project (before fix up).
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#2 User is offline   Dealmaker 

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Posted 29 September 2010 - 09:10 AM

HI
I would encourage you to listen to the free Partnering Webinar Series with Dyches and myself. It's free of course, the next one will be today.
http://www.dealmaker...pecial-webinar/

There are several ways to structure this deal. First, I would lay out the Contributions & Responsibilities of each partner. Then consider each scenario that could occur and who's going to be responsible. Who will cover the shortfalls? Who will make the payments... for how long? Who's responsible for the repairs? Cost of repairs?

If I'm your partner, I would have these questions for you:

Does the entire complex need repairs?
Have you managed a complex or tenants?
How long will repairs take?
What the exit?
When can I expect a return on my investment?
What happens if you don't complete the repairs?
How will I get my investment back if you don't perform?

I setup several partnerships a year and you should consider writing everything down for someone with experience to review before proceeding.

Let me know if you have additional questions.

Dealmaker
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#3 User is offline   BAXENDELL 

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Posted 30 September 2010 - 09:31 PM

Thank you very much Matt for the response and input. Unfortunately I missed the webinar but, watched the replay power slide. I will keep those questions in mind. I will be the one doing the repairs and management(Burden)while my partner fronts the money for down payment and we are working on trying to get owner financing. if they don't go for owner financing we will have to apply for a loan elswhere. (he has money but, I am sure he wouldn't want to tie it up ) I am assuming that since he will be putting the money on the table ($75000)and I have no money by the way, that I will have to structure the deal something like he gets a certain percentage (6%) on top of his $75000 paid back from profits from rental income and I will get paid the going rate for repairs and management fees ???? What are your thoughts about this way of thinking? Thank you for your time and advice.



View PostDealmaker, on 29 September 2010 - 09:10 AM, said:

HI
I would encourage you to listen to the free Partnering Webinar Series with Dyches and myself. It's free of course, the next one will be today.
http://www.dealmaker...pecial-webinar/

There are several ways to structure this deal. First, I would lay out the Contributions & Responsibilities of each partner. Then consider each scenario that could occur and who's going to be responsible. Who will cover the shortfalls? Who will make the payments... for how long? Who's responsible for the repairs? Cost of repairs?

If I'm your partner, I would have these questions for you:

Does the entire complex need repairs?
Have you managed a complex or tenants?
How long will repairs take?
What the exit?
When can I expect a return on my investment?
What happens if you don't complete the repairs?
How will I get my investment back if you don't perform?

I setup several partnerships a year and you should consider writing everything down for someone with experience to review before proceeding.

Let me know if you have additional questions.

Dealmaker

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#4 User is offline   Dealmaker 

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Posted 01 October 2010 - 09:32 AM

Partnering is only limited by what each partner creative imagination. They key question - are both partners happy with the arrangement? I can offer more creative options and for some, it only complicates the issue. So you guys can simply take a percentage of the deal, he could get paid with interest plus an equity state, you could get paid by equity stake only, or whatever. By what you're proposing, you going to get paid as a contractor and not as a partner? That's fine too. I just depends on what works for you guys. You're leaving out such issue like who's getting the rental income, who receives the proceeds when it sells, who's responsible for the negative cashflow, are there penalties for not getting it completed on time, who's responsible for managing the books, etc.. so many considerations...

What have you guys discussed? What is your money partner comfortable with in this arrangement thus far?

M
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#5 User is offline   BAXENDELL 

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Posted 02 October 2010 - 04:33 PM

View PostDealmaker, on 01 October 2010 - 09:32 AM, said:

Partnering is only limited by what each partner creative imagination. They key question - are both partners happy with the arrangement? I can offer more creative options and for some, it only complicates the issue. So you guys can simply take a percentage of the deal, he could get paid with interest plus an equity state, you could get paid by equity stake only, or whatever. By what you're proposing, you going to get paid as a contractor and not as a partner? That's fine too. I just depends on what works for you guys. You're leaving out such issue like who's getting the rental income, who receives the proceeds when it sells, who's responsible for the negative cashflow, are there penalties for not getting it completed on time, who's responsible for managing the books, etc.. so many considerations...

What have you guys discussed? What is your money partner comfortable with in this arrangement thus far?

M

Well, so far all as we have discussed is him coming up with the $75000 and me paying him back with 6%, we both went and looked at the property. I only mentioned "I will get paid the going rate for repairs and management fees" because I don't know how else to structure this. I mean if he fronts the $75000 and we get owner financing, I am not going to work on the place for free and pay him back 6% on the 75K. I guess I would have to somehow figure what percentage the labor would be and deduct it from his portion.

This post has been edited by BAXENDELL: 02 October 2010 - 04:34 PM

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