I’ve taken a lesson from Steve Case on this one, IF you listen to what he says he is a giver… He expects ALL of his partners to make good money and to share the rewards. There is no back stabbing, he/she gets more than me, and everyone knows their part. It’s a big win for everyone or he’s not going to do it… I see this same trait in everyone I want to someday be like!
My partners are just that, they are PARTNERS, they share the risk and the rewards with me! Normally I set it up so that the money partner puts up 100% of the cash and I put up or arrange all the day to day and we split the money returned 50/50.
Here are a couple examples for you…
A little Lonnie deal I did today, purchase price is $3360 needs about $150 in repairs, and we’ll incurre $110-440 in lot rent due to the approaching holiday season. The unit will sell easy for $11,900 on a note with $750+ down and the payments will be right around $225-250 per month for about 80 months. I do all the work, sell the unit, handle any repo’s etc. My partner writes a check and worst case will be in the deal for about $3500 after his share of the down payment which puts his yield at 34%+ and his total profit at about $5500 with the swipe of his pen if everything goes perfect and we never get the unit back. I’ll make roughly $9300 with his cash for doing all the work and handling every problem for the next 6 years. I consider this a win win and I think all of my partners would agree…
On bigger deals the numbers get staggering very fast! One of my partners and I bought 2 small MHP’s 2 months ago, I contracted the park negotiated the deal and did all the running. He put up 15k for the down payment and the owner carried $275k at 8% with no calls and full assignability. He has provided all the money to fix the properties and I’ve directed the operations and put a little elbow grease in to the pot. The property was just slightly over break even at purchase (about $50 in reality), by fixing a few management problems, replacing non-paying tenants, eliminating the drug dealer & the problem tenants, and making all safety repairs we’ve brought the net cahflow to about $2850 in 2 months. when the project is finished it will be up to a minimum of $4k /month net up to a potential of just under 6k if we get carried away. Once the outflow for repairs is under control we will split the cash flow 50/50 and the proceeds from the future sale the same, if we sell at the 24 month mark we’ll have realized roughly $100k in cash flow and a total profit of about $217k. That would put my partners yield at some where just shy of 200% and we’ll each walk with about 170k. If we decide to sell sooner the numbers might not be as high but we’ll still more than do ok!
The way I see it, is that a person with money and no time or knowledge is no better off than a solid investor with no cash. You put the two together and you create a deadly team that can quickly dominate a market and take full advantage of niches and opportunities as they are presented. My personal set point is that if I can’t give my partners a 25-30%+ return than I need an investor and must take 100% of the risk myself, if I’m not willing or able to do either than the deal is to skinny to be doing.