Partnership questions - Posted by Bob Johnson

Posted by Ed Garcia on December 26, 2000 at 11:36:14:


As you know I just answered your other post, and I feel that I don’t know enough about you, your credit, your circumstances, your market place, or how you view a deal.

You say that you want to do 2 to 4 deals a year. I like the idea that you have at least set yourself some sort of goal for next year.

When I question the way you view a deal, the first deal you presented us with is considered a land loan. A lender including a hard money lender will look at the LTV (loan to value) differently than if it were improved property. Although I know you made mention of the mobile homes, unless they are attached to the land by a foundation, they are not considered improvements.

Land loans, depending on location, very from 25 to 50% LTV. In most circumstances if the property is in a rural area, you’re looking at 25 to 35%. If the property is in a metropolitan area you can get the 50%. Again I’m giving you the rule of thumb.

Bob, if you have good credit and can find hot deals like you’re suggesting you want to do, then the way to go is to find a small local bank and develop a relationship. You would be surprised what they can do for you once a banking relationship is established.

If your credit is lacking, then find yourself a good LOCAL broker who has a local hard money lenders available. You can run ads for hard money in the same manner you’ve done on your above post.

There are many lenders who solicit this site and present themselves as hard money lenders and then don’t perform. I would like to caution you of that.

My suggestion is to deal with a group that either you’ve heard of, and to your knowledge come highly recommended, or a referral from a business associate, friend, or referral.

Ed Garcia

Partnership questions - Posted by Bob Johnson

Posted by Bob Johnson on December 25, 2000 at 15:00:05:

I want to rehab and resell 2-4 properties per year. Rather than relying on my own credit, I’m considering setting up one or more limited partnerships. I can find properties and obtain partial financing, but I would need to find partners to fill the gap and provide working capital. When the property is resold, we would split the equity appreciation. Although I’ve not yet done this, the numbers show a pretty good return on investment for everyone involved. I’ve also found an attorney who specializes in real estate and has done several of these before. So, I think this makes good sense. Two questions, though…

  1. What are some good ways to find investors who might be interested in being limited partners in such a deal?

  2. Can anyone offer any “lessons learned” or things to watch out for in this type of arrangement?

I want to start my first property in January 01. Any advice will be gratefully accepted. Thanks.

Bob Johnson

Re: Partnership questions - Posted by Tim

Posted by Tim on December 26, 2000 at 16:37:35:

I read and agree with Mr. Garcia’s reply. If that route doesn’t work for you and you continue down the limited partnership path I recommend you learn about Joint Ventures basicly the same as a LP but on a per deal basis.