Forming a Partnership
Let me tell you a little story about a guy named Tom.
Tom was hyper-focused on increasing his wealth, quickly jumped into real estate investing, and bought his first single family rental property...thousands of miles away from his hometown.
One day, Tom received a random message from someone named Alex. They'd connected on the real estate social network, Biggerpockets, and both happened to work for the same company.
"Let's meet up and grab coffee," Alex wrote to Tom.
Little did they know, that one sentence would be the start of an amazingly strong friendship. After all, Alex ALSO just bought his first single family rental property...halfway across the country too! Monthly dinners were arranged to chat real estate, finances, and business. Hanging out on weekends...became a thing!
Snapping back to reality...Tom is actually me (Tyler), Alex is one of my good friends (Ake), and that first "coffee business-date" was in 2016. Oh by the way, neither of us drink coffee....hahaha!
I'll admit...I sometimes (often!) find my mind pulling me in WAY too many directions, but you probably know that by now.
Remember when I said in the last post that I had a laser-focused investing plan:
BUY ANOTHER SINGLE FAMILY HOME.
Well, that laser had a little break in it. I'm now exploring another option I never thought I'd pursue at this stage: partnering on a bigger deal.
Now, we're not talking about partnering on a massive deal. We're talking about looking at properties under $200,000. Why even partner? For us, there are a number of reasons:
1. Less cash invested from both of us, but potentially higher returns on a small multi-family property
2. Expense risk reduced as they are split 50/50
3. Shared responsibilities in acquiring, renovating, and managing the property
4. We get to share best practices on how to analyze properties and utilize various tools
5. A chance for my friend to JUMP IN to the Indianapolis market and diversify. He already has property in California, Texas, and Tennessee.
6. An opportunity for us both to TRY out being in our first partnership. We both realize, as our cash starts to dry up with every purchase, we'll have to be more creative in the future when it comes to funding investments.
SO, as I continue to look for a single family rental property, I'm SIMULTANEOUSLY looking for a small multi-family in a partnership deal. Through the help of my agent, leads have already found their way to us :)
Partnership Lead #1
This duplex is listed at $105,000 and both units are occupied. Each unit is 3 beds/2 baths. One side is renting for $750 per month and the other side is renting for $775 per month. $1,525 gross rents per month. It's on a nice little dead-end street in Warren, which is a pretty decent neighborhood that we like.
FIRST IMPRESSIONS OF PARTNERSHIP LEAD #1: I like this duplex A LOT! The sliding doors in the front are a little unique, but I like the brick siding, dual driveways, maintained landscaping, and neighborhood. The acquisition price is amazingly low for a place renting for $1,500+. The numbers are ridiculously amazing. We're talking more than 15% cash-on-cash return....uhhhhhh WOW.
Partnership Lead #2
I literally found this lead on my phone while walking through Target. This single family property is a For Sale By Owner listed at $60,000, but if fixed up, should be worth around $95,000. This would be a buy, rehab, rent, and refinance project. Basically, my partner and I would buy it all cash, renovate it so it'll appraise for $95k, then rent it out at $950 per month.
Now the really cool part: we'd eventually refinance the property by putting it on a conventional mortgage, and pull most of our money back out. At the end of the day, we'd have VERY little money in property, it would cash flow, PLUS we'd have most of our money back and ready for the next investment!
FIRST IMPRESSIONS OF PARTNERSHIP LEAD #2: The property doesn't look great. It needs some work and updating for sure. But, my partner and I have learned...the uglier the property, the better for potential returns. Built in equity is key to pull off this strategy! Now, I will say, we don't want a complete gut job though...nope, that would be quite the task especially being out-of-state. But, the bones of this property look decent enough so it's worth a further look. If we can get this place for a little under $60,000 and keep our rehab cost under $20,000, this could be a great investment!
Partnership Lead #3
This duplex is listed at $155,000 and it's in a suburb outside of Indianapolis (about 25 minutes away). Each unit is a 2 bed/1 bath and both sides are currently renting at $650 per side. BUT, looking at data in this neighborhood, there's a strong case for being able to raise rent to $750 per side. This would be huge!!!
FIRST IMPRESSIONS OF PARTNERSHIP LEAD #3: This is what I'm talking about! We really like the single level duplex layout. Each unit has it's own garage and driveway. Brick siding is a plus. Definitely one of the newer properties we've looked at. And there's definite potential to raise rents. Now, it's in a suburb of Indy I know NOTHING about so there are some unknowns. BUT, here's the most unique part of it all:
See that BLUE arrow? That's the duplex.
See that RED arrow? That's a single family house with an estimated value of $572,000 only a block and a half away. WHAT?? A duplex going for $155k surrounded by properties in the $300k, $400k, and $500k range??
This is sorta strange, right? Well, it's a super unique opportunity. And, we like it. We like it a lot!
Three great leads. Three great properties. And potential for a strong partnership opportunity. But, at the same time, I'm STILL keeping my eyes open and looking for a single-family home for myself. What's next??
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