Partnering
hello eveyone, got a question. i recently attend an REI club in my area and i went in today to talk to the REI that put on the seminar. in talking with her she advised me since i don't have the money but good credit maybe i should think about partnering up with someone. someone with the money but not good credit, she said that she knew a number of people that she could choose from. is this a good move for a newbie like me.
It can be. Take care to get a good contract written. One that spells out exactly the responsibilities of each partner. What is to happen and when, and what will hapen if one turns out to be a flake. Have a partnership agreement for each deal, so when you are ready to roll on your own. you do not want to be obligated to your partner for future deals.
I guess my advice is to go for it, but make sure you watch out for yourself.
Good luck,
Jeff
Firegal,
Just to add to what has already been sadi, don't assume that once you have dione a few deals with an investor, that you can skip the formalities of a contract. When it comes to money, people can be funny and letiguous even if they are making money.
I personally think that partners is a great way to go. Why use your own money when you can use someone else's money. Mark (commercialKing) talks about not using his own money for any of his deals!
Robert
[addsig]
Remember partnerships sometimes go sour, so be careful who you choose. Although it sounds like to me that you are looking for more of a mentor then a partner.
A partner can be a great idea to get started in investing. But when choosing a partner with bad credit keep in mind that they have bad credit for a reason. They have a history of not paying what they owe. Choose your partner carefully.
The essence of a good partnering situation is to get things in the partner that you don't have yourself. If that is cash, then that is a possible basis for a partnership. But more important may be the more intangible things that a partner brings to the table. Experience, for example. Or construction ability. Or the ability to manage a property that is too far from your base of operations.
The problem in a partnership (from both peoples point of view) is knowing that the other person is able to perform their partnership duties. It seem to me that more partnerships get into trouble over one party thinking that they are doing more work than the other than almost any other cause. That is why I like partnerships where one person puts up the money (cash and/or debt) and the other does all the work. This way there is no dispute about who's shirking.
Finally, a word to the money end of partnerships. It is always easy to believe that if the "working" partner only worked a little harder your rate of return would go up. Don't be a pig, let the other guy make some money too without being up his butt every day trying to squeeze a little harder. Its supposed to be a partnership, that means you are both on the same side.
Along these same lines, I'm interested in 4 townhouses in my area that would have pretty good cashflow. I just rehabbed 3 units to hold, so I don't have the down money right now. Thinking about asking my step-dad if he wants to partner on it. He would put up the money for the down, I would get the mortgage and hold it in my name (no problem w/credit), and I would do all the work (minor rehab, repairs, management, etc.) I know he could use the tax break, but I'm not sure what else would be in it for him. Any advice on how to structure the proposal to him? I wanted to do something other than just have him hold a second mortgage for the down money. Any suggestions?