Welcome to Cleveland real estate investor. On this podcast, you'll hear about every aspect of the real estate investment business. You will talk to your rockstar investors about their businesses, how they built them, where they came from, and where they're going. Who am I? I'm Joe Lieber and I've made millions of dollars from the real estate investment business over the last 20 years. If you're ready to hear the good and bad from a guy who's learned this business from the school of hard knocks and get educated by some bad ass entrepreneurs, then put your helmet on, strap on your chin strap. Let's ride.
Hey, what's up guys. Thanks for tuning in to listen to me. Yap on this podcast. I'm glad you're still sticking around. I appreciate you tuning in here. So I wanted to talk to you guys say about partnerships. You know, I've had a lot of these over the years and I've had good ones and bad ones.
(00:52): I just want to talk to you about it a little bit. In case you're going to enter into a partnership to do real estate deals. I mean, let's face it, it's expensive. There's a lot of components to this. To make this whole engine run, you have to be, I don't want to say firing on all cylinders, cylinders, meaning you've got to have the deal flow. You've got to have acquisitions going where you're getting good deals. Either got to have money or have access to money or financing. You have to have good operations. You gotta be able to swing a hammer or understand enough about construction to where you can hire people at the right prices and understand how that works and make sure you're not getting ripped off or taken advantage of or doing the wrong things. I mean, I remember what I used to put, this is so silly on my guy coming and saying this.
(01:41): I used to have the plumbing stripped out of my houses and I will call a plumber and go back in with copper plumbing to get it stolen again. I mean, what a knucklehead, right? I didn't even know some of the other things existed, like plastic or CPCV or taxed or whatever. All that stuff is. And then disposition, you know, you gotta either be a great agent or broker or have a great agent and broker. So sometimes it helps to partner with some of these people so they can bring equal amounts to the table. Someone's going to tell you some stories today about partnerships that I did that didn't work out and how it took me only about four 15 years to figure out how to get them to work. And it was one heck of a learning curve. So maybe some of the things I'm going to say today, I'll just get your mind thinking and hope that I can see around these corners a little bit and shorten your learning curve to this stuff.
(02:36): So I'm just thinking about my first partnership, right? You know, we didn't know there's no defined roles. So my advice is to, if you're gonna enter a partnership, like make sure everyone knows their role, what are they going to do? So the very first one, my buddy and I both financed a bank loan and finance the house together. We were young but we didn't know. And then we go over there and we start playing contractor ourselves and then they will be like, one of us has shown up, one of us is not and then one gets pissed off at the other or we're so emotionally involved in the project, we can't agree on what color cabins to get or what Florida buy and I'm over there working and he's out there, he's over there working and I can't be there cause I want to go out on a date or something.
(03:24): And the whole thing didn't work all the way through to like what real estate brokers should be hired to sell the house. The roles weren't defined and that's definitely not the way to do a partnership. So continuing, you know, I went on and to do other deals and got new partners and like I'm thinking of another partnership I had after that one or I thought I was a little bit smarter and wiser and I was and I did do it better. That's the cool thing. You always get a little smarter than every deal. But the next one was that my buddy would bring the money for the asset. I would pay him like 8% interest on that and then I would pay for the rehab or we split the rehab actually. And then we were split for a rental problem. We were says, well listen, we were keeping houses for rental purposes.
(04:07): Then we split the rent 50-50 not that I shouldn't say the rent. The rent would come in, we'd take out his 8% mortgage, take out taxes, take out insurance, and then we split the profit 50 50 which was good. But what happens, see things change over time. The first couple of deals might go one way, but people evolve, they grow, things change. And what was happening for me is, although my partner was bringing all the money to deal, I was so heavily involved in operations, it was sucking up all my time. You know, at that point I want to say we had maybe a hundred doors that time, him and I, that's a lot. And that's quickly, it becomes a full time job. And then I'm like, well wait a second man. Like we have mortgages, all this stuff. We're not like super, super profitable, not involved, hours upon hours a day.
(04:57): Just doing operations, meaning like rent collection, water book collection, facilitating service calls, dealing with contractors, turn over evictions. It's a lot. It's like, you know, property management and then like I wasn't charged in our property management fee. It was just the numbers. It was what I just told you. We, you know, a thousand dollar rent, his payment was 500 you got taxes, insurance, you're making 300 bucks a month, you're splitting that 50 50 for awhile there I was like, man, I don't know if say that could have a deal for me. I'm not really making what I want to make and I'm really heavily involved, but you do things and you have to keep tweaking and tuning and learning and changing as time evolves. And then like other partnerships, I went through a period of time where I was always watching my mortgage broker French, you know, they'd always be like, dude, throw it on the wall and see what happens man.
(05:46): You got to get more deals in the pipeline, more stuff that can go wall. Stuff's going to stick, stuff going to stick. So I was like, I applied that theory to real estate thinking that would work. And also I'm buying a bunch of houses, selling them on lease option and trying to get these people to finance these tenants, finance the buy these homes. I went through that for a long time and I was taking partners anywhere. Part of Ali's mortgage guys, you know, they were making good money, they were finance real easy and they had the low down on how to get these loans cause they're in the business, right? It's, I thought, what a great part. I started doing that with them. What I quickly saw is my rule, like my rule now that I know is I only partner with people who have money.
(06:26): Like you gotta have money. Dude, if you don't have any money, I can't partner with you because you know why things are going to go wrong. That house is going to sit longer than you thought. You're going to have holding costs. You could have been at longer than you think you're going to be in it, something's going to go wrong and you've got to have some reserves. And this is, this is me now and this is me 22 years later saying these things. I mean, your situation could be different. Maybe like do it, I'll do anything. Guys gotta get deal flow and that's fine. But as you grow and mature and you have a little bit of assets and some cash, this is me. I only liked the part where people have money, right? And they're not going to be whining and crying that a deal didn't close.
(07:06): And I need this check. I can't, it's too much pressure for me. I remember doing that, you know? So I might have had maybe 10 1215 partners. I had only multiple houses and then they would come to me through the mortgage business to slow it down. Or I having a bad month. I don't know what else. He's a furnace down Oregon. I do. I don't have the money. I'm like, dude, we're 50 50 partners. We gotta split that bro. And they don't have it. So those partnerships are really bad. Thank goodness I was able to get out of all those and we all went our own ways, but I would never do that again. That was definitely not a good deal. And you know what? Like even back then, you have to define the roles that you know, their role was to, I was bringing the asset to the table.
(07:48): They were bringing the financing to the table, right? I'm bringing operations, I'm bringing the buyer. To me, there's four components to this, right? There's acquisition. Now, I've talked about this before. There's acquisition, there's the money component, there's the operations, right? Meaning the rehab, and there's this position. So back then I felt, I didn't even know this at the time, what I was doing. Now I understand that all these years later, but I was doing three quarters of it. I'm bringing the acquisition, they're bringing the money or the financing. I'm bringing the rehab, the operations, and I'm bringing the buyer or taking the tenant buyer and massage and that together and trying to get them financed. And it was a lot. Right? I was in full control of that. So I'm doing three quarters of the work, but we had a 50 50 partnership and like I said, things change, right?
(08:36): Like, man, this just doesn't, I don't want to do this again. I don't like this deal. So you see, continue to grow and evolve and learn and make mistakes. Just like fast forward and along here a little bit. Now I do, once again, I know they were going to call this. Now I do JVs joint venture agreements and their partnerships, but now they work so well because I understand them and that's what I was doing back then. But I didn't know the column JVs, I didn't know what a joint venture was. Never heard that I was turned off to it for a long time. I wouldn't partner with anybody. I'll say from 2010 maybe 2011 odd, never had a partner again. I wouldn't hear it. So many bad things that happened and crappy situations that like, dude, I don't know how many partners, I don't need anybody and now it's changed.
(09:26): Joint venture is a way for someone to have a multiplier effect. There's so much, so only so many deals. One person can do with a team, never a pretty good sized team. I have a project manager, I have an acquisition manager, I have a disposition team, project manager handles a couple of crews we have running. But it's still a lot, a lot going on and doing joint ventures can be a great way to, to have what they call the multiplier effect. And so when you multiply your efforts with not multiplying all the work on me or my team or me having to hire and bring on the right people, it's a ton. So now like the joint ventures that I do, it depends on what, what a person calls and asks for me. You know, sometimes they call and they say, Hey Joe, I have an acquisition.
(10:13): I have a deal. Great. What are you missing while missing the money? Okay, well yeah I can take that can bring it to the table. What else can you do? Can you do the work on the property? Do you have someone that can do the work on the property? A lot of times they do and then they're missing a key component at the end of this. It's just that the buyer, the disposition, how are you going to sell it? We saw that on my last, well he's selling a turnkey to a national international buyer. It's hard. I have a lot of national international buyers a lot. You know how much work it was to get those relationships and almost flush ahead to press and wait times of those long nights, long flights, the red eyes all over to make those deals and a lot of people liked that.
(10:54): They leaned on me for that. Wait a minute, guys could work. Joe, what if you bring money in a buyer and they bring the acquisition and operations and we're 50 50 on it. Pretty cool at works. We're doing them, we've done it. It works well. It's awesome. The JV didn't know that, but the roles are very defined. We're not both going over there trying to work on the house. I'm not trying to bring, bring my project manager over there and give my 2 cents. I advice my JV partners and say, Hey, I think we should do this and not this, and they love that and that's the whole purpose of it. Right. Partnering was a pro. Basically. I've been doing it long enough. I can call myself that. It works, but it's very defined. We're not stepping on each other's toes, so that's it. That's what I was want to talk to you guys about. State joint ventures. They're great. They can work, especially as you mature in the business, bringing people in with you can really help multiply your efforts and reach out. If you have any questions, more questions about it. If you have a deal that you might want to join with me on, cool. Let's have a conversation about it. Thanks for tuning in. Great day.
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