I began writing this several months ago, as the story of my dying real estate partnership was beginning to unfold. It was really an exercise in venting, but after the latest developments, let it serve as a warning to anyone considering partnering with anyone in any venture.
OMFG! For the love of God, don't do it! Your money or your life? It might just be the latter. Or worse, it might end up being the next MF's life, when you have to kill his dumb ass for causing you to lose money and sleep.
Its not supposed to be this difficult. Why do humans insist on complicating simple and straightforward matters?
Some months ago, some of you may recall that my real estate partners and I decided to dissolve our LLC. We just had too many disagreements about strategy, direction, and how to DO this business. A real estate business that buys one house in a calendar year is a not a real estate business. You can't even deny that away. I've come closer to doing more deals on my own, in the last 6 months, than the LLC has in the last 15 months. Its pretty pathetic, actually.
So now we find ourselves trying to extricate ourselves from further self-inflicted damage, in the form of losing every penny of our initial investment of $11,200 each. Now, I've come to terms with this money being gone. Personally, I'd rather just get out and be happy then drag this monster along any longer. Needless to say, I have my accountant on the case as to how to profit (or at least benefit) from losing $10,000 again. Now, I'd love to find a way to get something back, but I am not at all attached to this outcome. My sanity just isn't worth the price.
Anyway, it seems that every property gets vacated by the crappy tenants, usually leaving behind a few thousand dollars in damages and no revenue coming in. So we end up spending what little money we have getting each house back in rentable condition. Since December, we've lost 2 tenants, sold the best property (to one of the partners, no less), and had the last property inspected multiple times by Section 8 (each leading to failure) because the previous owner was a slumlord. 3 properties generating no revenue. How much worse can it get? I'll tell you how - having to put in more cash to keep this monster alive.
My goal at this point is to get out with as little additional out of pocket expense as possible. Right now, we're scheduled to have a meeting -- the first in months -- next week to discuss the current situation. I've already recommended that someone call our loan servicers and start negotiating some agreement so that we don't risk foreclosure. Of course, our loans were securitized so dealing directly with the lenders is nigh impossible. Once I can get a straight answer on our asking prices, I'll start posting online ads for each property. I hope that doesn't take too much longer. Finally, I've been tapping my network of friends and investors to see if anyone knows someone looking to acquire properties in Baltimore. They all require some work, but keeping this in mind, we're willing to adjust the sales prices accordingly. Somehow, it seems like I'm the only one concerned. I guess that means I won't be asked to put up any cash later on; everyone else seems to have that covered.
What a mistake! Don't do it, guys. Just save yourself the hassle. Partnerships are a losing proposition. I'm not sure what the winning answer is, but I can tell you quite a bit about how not to do it. Don't partner with people you haven't personally known for some time. Start with a small project, work it all the way through, and see how everyone responds. Ideally, from your interaction, you'll know that the partners all think almost identically about the business and how it should be conducted.
Better yet, just go it alone.