In the classroom today, Nate Armstrong talks to us about two types of money partnerships that he does and how it benefits everyone involved.
By having an investor put up the necessary money, while you handle everything else, you’re able to split profits and do deals without putting your money up front.
Mike: Welcome back to the FlipNerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Nate: Hello and welcome back to the REI Classroom. I’m Nate Armstrong, author of the bestselling book, “Real Estate Gold Rush.” Thanks for joining me. Here today, I get to talk to you guys today . . .
Mike: This REI Classroom real estate lesson is sponsored by VirtualStaffNow.com.
Nate: What are money partners? Well, if you’re a real estate investor and you’re out there doing real estate deals, if you want to go faster, sometimes the key to going faster is to have more capital. If you don’t have the capital in your back pocket or your bank account to get more properties, then another good option is to bring on other people that have money so you can continue to fuel your business.
Today, I’m going to talk to you about the two different partnerships that I use. So number one, I like to do 50/50 money partner deals. What does that mean? It simply means this. I find partners that have a lot of cash and I go out and do all of the work on the real estate deals. I let them bring the cash to the table and then after we buy it, fix it, sell it, or buy it, fix it, rent it, I split the cash with them 50/50, simple as that.
So literally, I’ve got one partnership. It’s been going for about seven years right now, where we’ve probably bought 60 to 70 houses together and an apartment building together. In that time frame, my partner has literally put up $2 million, maybe $3 million of his cash and I’ve gone out and bought property with it, fixed it, and sold it. Bought it, fixed it, rented it, and I’ve done that now for years.
In that time period, it’s probably made me, I don’t know, $500,000 or so in that same time period all with none of my own money, 100% of my partner’s money. So if you’re looking for a good way to bolster your real estate business without burning all of your own cash, then bringing on a money partner might be a good option for you.
Now, the next option here for money partners is a lending partner, lending. What does that mean? It simply means this. There are a lot of investors out there that they want to get into real estate, but they don’t really want to go through the ups and the downs. They don’t want to think about any of that stuff. They just want a secure or a fixed interested rate.
So what I do with lending partners, when I see someone that says, “You know, I just want a straight up interest rate,” then I say, “Okay, great. Here’s what we’ll do. We’ll take your money for the project. You’ll send it to the title company. We’ll record a mortgage or a deed of trust against the property.
If you’re in like California or Colorado, it’s a deed of trust, or Missouri. If you’re in Minneapolis, Minnesota, or if you’re in Wisconsin, it’s a mortgage. So it’s the same document essentially, but different states call it different things, either deed of trust or mortgage.
So we record that against the property to give the lending partner, the lender, interest in the property in case I get hit by a bus or something crazy. Now, with that, we agree inside of a document called a promissory note exactly what the interest rate should be and then what the payment terms are. Meaning, “Am I borrowing it for six months? Am I borrowing it for 12 months? Am I paying 10% interest? Am I paying 6% interest?” All of that stuff is discussed and outlined right inside there.
Now, I am not a real estate attorney. I am not a CPA. So make sure you take this data, this video, to your CPA and your attorney to make sure that it’s structured right for you and your potential investor. But I use both of these vehicles frequently. Especially when my partners have a lot of cash, when they’re an accredited investor, I can do both of these methods all day long with them, no problem.
In today’s world, there are so many people that are nervous about the stock market. So you can go out there and find more and more people like this. Doctors, dentists, lawyers, they don’t want to park all of their cash in the stock market. So they’re looking for people just like you and just like me to go out and do real estate deals with.
Hey, I hope that this message really helped you guys. I hope it served you. Again, I look forward to seeing you again in the next one. But my name is Nate Armstrong, author of “Real Estate Gold Rush.” I’ll see you again soon. Thank you.
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