Michael,
The primary thing most "cash partners" I know look for in scenarios like you are describing is ROI.
IF you have the ability to locate "good deals" and place them under contract, cash partners will be easy to find. Take your deal (contract) to any REIA meeting, stand up, and say, "I have a house at 123 Main St. that comps out at $100K (here is a BPO to prove it), it needs $10K worth of paint & carpet, and I have it under contract (hold up your contract) for $50K. Who would like to partner with me on it as a rental / flip / wholetail, etc.?" If your numbers are right, several folks in the room should mob you. Evaluate their offers, then choose your new partner(s).
It's been my observation that most of the time when both parties are inexperienced investors, one or both will propose something to the effect of, "You put up the money, I'll do the work, and we'll split the deal 50-50." I rarely see these partnerships work longterm. One party needs to extract all the profit from each deal to survive, while the other wants to roll the profits back into the business and grow it as fast as possible.
When more experienced investors are involved, many times I see them try and skew the percentages in their favor (whichever side they are on - cash or worker bee). Again, I don't usually see those partnerships last longterm as the junior partner quickly feels resentment over the unequal split.
The partnerships I do see last over time, are those where each party gets compensated fairly and cleanly for each function they perform. I know many seasoned investors who break the deal down into it's component pieces, assign each a percentage value of the overall deal, then say, "Which pieces can you do / do you want to do?" Then the other partner takes what's left. Sometimes they will then agree to split any remaining profit when the property is finally sold.
I'm not familiar with your particular financial picture, but the advice I give most of the mentees I work with in the situation you describe is to:
- Honestly evaluate your life and determine if you are in a position (now) where you can afford to be in this business, or do you need to wait a little while until after you make a few changes. Do you have some cash to work with? Doesn't have to be a lot, but you must be able to at least afford business cards and marketing. Are you willing and able to commit the time and effort necessary to be successful?
- If cash is short, examine your life and reduce all the costs you can. Do you really need cable TV and a landline? Could you sell your expensive new car (and stop making payments on it) and buy a $1500 "beater?" Can you hold a garage sale to generate enough money to start marketing? If those do not produce the needed cash, consider temporarily getting another PT job. How many yards do you need to mow or pizzas do you need to deliver to generate enough cash to launch a marketing campaign?
- If you are able to locate "good deals" and place them under contract, do so. Then sell a few, keep the wholesale profit, then do something that generates more cash flow. If you do not know how to do that, is there someone you can apprentice with (for free) who is willing to teach you what to do to be successful?
This module in my workshop lasts about an hour, but you get the idea.
When you strip down the REI business to its core, the fundamentals all revolve around "good deals." With them, money will find you.
Let me know what else I can do to help you grow your business.
-Greg
Greg Wilson
The REI Mentor
