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Real Estate JV Pitfalls

Discussion in 'Business & Tax Advice' started by texas_amy, Jul 13, 2009.

  1. texas_amy

    texas_amy Registered Member

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    An acquittance wants me to invest in buying a rental property, I know the person to be honest but since I've never invested in real estate or any JV for that matter, what pitfalls should I be looking for?
     
  2. DrJekyll

    DrJekyll Senior Member Premium Member

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    lawyer, thats where you need to be asking when you get the contract drawn up

    get a contract, and thats if your friends. You are talking business, and anyone that dont want to get something in writing is not legit, not your friend, or both.
     
  3. playercool

    playercool Junior Member

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    Seek legal advice immediately.

    I invest in real estate in Texas. I do so individually. It can become a mess when more than one person is making decisions.

    There are so many things you need to consider. For example are you both putting in the equal amount of cash? Are you getting a loan? Whose name is on the loan? Make damn sure both names are on the deed. Or better yet get yourself an LLC and have it equally owned by both parties. Then have the LLC purchase the house.

    But then you still have some many other issues to deal with. For example you have to rent the house. How do you decide the tenant? What about when the annoying tenant calls and wants you to fix the toilet. Who do they call? Are you doing more work than your partner? Are you pissed off now because you feel like you do more than your partner?

    Do you see all the things that could go wrong. There are about a billion of them. I am not trying to scare you I am just trying to open your eyes so you will think about all the pitfalls.

    Investing in real estate though can be highly profitable if done correctly. Owning rental property is the get rich SLOW approach. If you have a ton of years on your side it can be a good investment. Just understand that most of the time you won't have a positive cash flow. It might look like you do on paper but just wait until you have to start making repairs and accounting for vacancy. It is a nice tax write off though if you have other income.

    Ohh well enough rambling this is just MY OWN OPINION. Do your own Due Diligence and seek appropriate advice.
     
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  4. Grandslam

    Grandslam Senior Member

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    When it comes to investing in real estate, there are 3 factors that either make or break an investment. They are:

    1. Management - Do you have a management company in place to manage the property? Do they have a clean track record? Ask for referrals. Is their pricing fixed?

    2. Financing - What type of financing is in place? Is the seller carrying back? Bank loan? Do you know the exact terms of the agreement? Fixed rate? Down payment? PMI cost?

    3. Partners - What is your partner's track record? How many deals has he done? How many successfully? Does he have a professionally created business plan? Does he have accountants, RE attorneys, property managers in place? If so, how does he know they are competent?


    Become fine with the thought of losing your entire investment, and you will be fine. I say this with zero sarcasm, as this is how the game is played. Do not be upset if you lose your money - it is only a learning experience. Educate yourself about the subject of real estate investing before making the dive, and you should ride out the waves just fine. Just don't get in over your head at first. Start small and your education will grow with your experience.


    Start small, think big.


    Hope this helps.
     
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  5. texas_amy

    texas_amy Registered Member

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    Excellent points there, I think I'll start small.
     
  6. mramer

    mramer Newbie

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    I'm a little late to the thread but ask yourself why the other person wants you to be their partner? Why wouldn't they go in themselves if it's such a good offer? Possibly b/c they don't have good credit or don't want to risk their credit or money?