Can’t do it by Yourself?
Perhaps you can with help from friends – sometimes, buying with partners can be the ideal solution.
Years ago my brother Bill and I lived next to each other in South Fort Myers. Sunday mornings while the wives slept in we would jump in the car and go look at property or boats. One Sunday we decided to go look for a dock slip to rent or buy so we could house our boat. Up to this point every time we went boating we had to trailer the boat to a boat ramp. (This little trip was a good combination of our passions – real estate and boating!).
After meandering around for a while, I saw a sign on a dock on the way to Fort Myers Beach and called Marty Wallerstein, the agent on the sign. Marty informed me this was actually not a dock for sale but a house with a dock. I told Marty what we were looking for and he said he had a perfect home with room for a boat in the back yard. (For those of you that know me, this is a typical Bill and Gregg story – go out looking for boats and come back with a house!)
The home was a tri-plex with the top floor elegantly furnished, a three car garage, a boat slip that would let us be minutes by boat from the Gulf of Mexico- and it came complete with two tenants in the two efficiencies on the first floor. Bill and I had owned boats together before and loved the economies of joint ownership. We normally played on our boat together anyway and owning it as partners made everything, in essence, half price.
The next day, after doing some research, we made a deal on the property. I decided to try to put together the purchase of this income property with a few friends. Here is how we worked it out:
My brother Bill and I and two friends from Scotland each put $30,000 into a new bank account. This money was used as the down payment and as a cushion for any negative cash flow. We also needed some funds for a lawyer to draw up the agreement and a few repairs on the property.
See full story on Buying Real Estate with Partners – Gregg Fous
That was years ago and we have since sold the house, but I learned a great deal from the experience.
Here are some key points to take away:
- Get a “meeting of the minds”. Make sure you all have the same objectives or at very least objectives that are not mutually exclusive.
- Plan for surprises – deaths, illnesses, divorce.
- Work out an exit strategy.
- Budget for surprises – both capital calls and higher than anticipated holding costs
- Your partners should have a similar financial situation. (Don’t be the only rich guy)
- Don’t be afraid to keep a majority for your self at a reduced price – since you are the organizer.
- Look at alternatives. Once you make the decision to do this, look at other ways to accomplish the same thing.
- Put EVERYTHING in writing
- Get a good attorney.
- Keep excellent records