Partner with Tim Mullins Real Estate Investing
Becoming a partner with Tim Mullins and the Complete REO team.
Enclosed you’ll find:
- Our Philosophy of business
- What you can expect from me
- What I expect from you
- Potential expected returns
- Application for partnership
We look forward to having you as a potential partner with us in order to make you a successful real-estate expert and to have a prosperous partnership.
My 5-year philosophy in borrowing money
My philosophy in paying off rental properties within 5 years is to create future assets rather than instant cash flow.
Before entering into our partnership, you must understand my philosophy in borrowing money to purchase single-family rental properties. Back in 2007 when the real estate market dropped off, I began purchasing properties using investor money. My game plan was to have each property paid off within 5 years. Since that time, I have purchased over 100 properties using this method.
Here’s how it works…
- You borrow no more than 25,000.00 per property. This includes any fix up costs that the house may need. If we find a great piece of property, and after doing our calculations we realize we will go over the 25k, we can always choose to contribute some of our personal money into the deal. But the rule that I’ve always kept is to not borrow any more than 25k per property.
- I pay my investors between 8-10 percent interest rate. This may seem like a high interest rate, but one thing to remember is that we don’t have to pay for an appraisal, closing costs, etc. The only fee that you will have to pay is a 750 dollar financing fee as an upfront bonus to investors. Remember, we get the best deals using cash money. Banks will give us a great deal if they know we have the cash in our hands. Using investors allows us to get cash quick and close on properties with no hassles.
- Our cash flow during these 5 years is very bleak. There will be times that we will have to contribute out of our own pockets to cover expenses. Here is a breakdown of what a hypothetical situation will look like.
Let’s say that we bought a 3 bedroom 1 bath ranch home for 16,000.00, and we put 4,000.00 into the property for a total investment of 20,000.00. Here is what the expense breakdown will be close to: All expenses are calculated per month.
Borrow 20,000.00 @ 9 percent interest rate with a 5 year amortization. The payment is $415.17
Our taxes on the place at 0 percent homestead are approximately $100.
Our insurance with a renter in the home is approximately $50.
Maintenance is about $60.
Our total payment every month for our rental property is 615.53. Let’s say that we’re only getting 650.00 per month. That only gives us a cushion of 34.47 for anything that could go wrong. So that means if we need to repair a furnace, water heater, electrical, windows, etc., etc…we will have to contribute money out of our own pockets.
My philosophy in paying off rental properties within 5 years is to create future assets NOT instant cash flow!
YOU WILL need some money of your own during the time that we owe money. You will have to contribute.
The benefits to my system ensure short term debt. They also create a snowball effect. If you purchase properties over a 5 year period, at the 5 year mark from when you bought your first property, we will have house after house coming free and clear. Then we will begin to have good cash flow as well as good assets.
Real estate partnership agreement
What I will expect from you in our partnership.
1. Finding the properties
***THIS IS THE MOST IMPORTANT PART OF OUR PARTNERSHIP***
This is the most important role that you need to take. You have to become an expert at finding deals within your city. I will teach you how to find these deals, make offers, and make money by finding the right properties. The better you are at finding good deals, the longer I will want to partner with you. If you are only able to find average deals, I won’t be interested in partnering for long term.
2. Getting the properties fixed up after purchasing it
I will teach you how to get the properties fixed up by the most cost effective ways possible. When we close on a property, it will be your job to organize workers in getting the house ready to rent. You have to get the house fixed up A.S.A.P. Every day the house sits vacant, we are losing out on rent money that could be coming into our pockets. It’s extremely important for you to be able to coordinate the fix up process very efficiently and frugally.
3. Getting the properties ready to re-rent
When someone moves out of our rental property, it will be your job to get the place ready again for the next renter. The property must have a punch list done..(Ensuring everything is working in the house)…, it must be cleaned and ready to go A.S.A.P. Once again, time is of the essence in dealing with properties that don’t have renters in them. Every day counts!
4. Lease signings
We will take care of putting the ads on craigslist and screening potential renters. Once we find a qualified renter, my office staff will coordinate with you when a lease is ready to be signed with someone. You will have to meet with the renters somewhere and go over the lease in detail. You need to make sure you go over every line item within the lease to make sure that they understand what they are signing.
Every once in a while a renter will protest an eviction. If that is the case, you will need to go to the courthouse and represent our company. My lawyer will be there to represent us but you will still need to be present.
6. Non-compete clause.
While you’re in an active partnership with me, you’re not allowed to purchase investment real estate without offering it to me first. I plan on investing time, knowledge, and resources into you and I want to reap the benefits of that investment.
7. You’re a 40 percent partner.
When looking at what you can expect from me as a partner, you can see real quick why I am the majority owner of the business. So here’s what it means to be a 40 percent owner. If we ever need to make a capital contribution from our own monies, you would contribute 40 percent of the total monies needed and I would contribute 60 percent. I also own 60 percent of the assets and you own 40 percent. I will be responsible for 60 percent of the taxes at the end of the year while you would be 40. Etc.
I also have the final say within the business. I consider myself a fair person and I will be a fair partner, however I have “been there and done that” and so I know the pitfalls that could trap us and I know how to be aggressive but yet stay safe. I will listen to your ideas, concerns, and suggestions, but ultimately I have the final say.
8. You must have available money.
My rule of thumb is that you need to have either cash or credit lines for 25 percent of the amount that you have borrowed. Let me explain. Our partnership is a 60/40 partnership. I have 60 percent ownership and you’ve 40 percent. If we borrow 20,000.00 for a house, your liability to that debt is 40 percent of 20,000.00, which is 8000.00. Of the 8,000.00 that you’re liable for, you need to have 25 percent of the 8,000.00 that you can get access to for emergencies. 25 percent of 8,000.00 is 2,000.00.
As we purchase more properties, you will need to make sure that whatever debt liability you have, that you have 25 percent of that amount available to you. The funds need to either be cash or accessible credit lines.
9. Ethics and confidentiality.
What we talk about is confidential. I don’t need anyone knowing my business and how I do things. The less you tell people, the better. Also, you might see some confidential investors of mine and you’re never to call them yourself for anything. I have over a decade of experience buying rental properties and I will be teaching you creative ways to get ahead of everyone else. I expect you to be loyal and trustworthy towards me.
10. Partnership Fee
You will pay an initial partnership fee of $6,500 for the first 2 properties and if I am happy with the partnership and more funds are available there will be a $750 financing fee per property thereafter.
Real estate partnership agreement
What you can expect from me in our partnership
1. Personal mentoring
Either I or someone that I have trained will walk through potential properties in your area teaching you my parameters and guidelines in what to look for in getting the best rental properties.
Someone on my team will be available for questions, concerns, and mentoring, to help you become an asset in our partnership. I will also be available to ensure that you will be safeguarded against pitfalls that you may fall into, which more than likely would happen if you didn’t have an experienced partner.
I can do a conference call with you and other partners in my organization to talk about the development of our real estate business.
I will secure investor money for your projects that you find. (They need to be extremely good deals, and I have to be happy with the property in order to purchase them).
As a partner, I will make sure that I have the money secured to do at least two deals with you. I can’t guarantee that I will be willing to do more than two deals with you.
Here are the reasons why:
Are you a good partner?
I have a proven track record of being successful in residential real estate. I want a partner who wants a mentor and who is willing to learn from me and will also trust me. I also want a partner that has some very good qualities to them. Here are some qualities that I expect my partner to have.
- Problem solver
These are just a few very important attributes that I expect from a partner. So if I feel like you’re not being a good partner, I will discuss my concerns with you and will expect you to change. If over time you do not change, I won’t be doing any more deals with you and if need be, liquidate our assets and cash us out.
Another possibility is that we don’t gel as partners. There are some instances where people in partnerships just don’t get along. It doesn’t mean that either individual lacks good qualities of being a good partner, but instead, the personalities of the two people just don’t mesh.
Securing the money
I have plenty of investors but sometimes I run into a short period of time when I can’t find investor money. (This rarely happens). My point is that there are no guarantees that I can always get available money for lots of properties. However, I wouldn’t be offering a partnership if I thought that I couldn’t get the money.
There is also the possibility of a financial collapse in America. If that were to happen, it might be a really good thing for property investors, or it might hurt us. That is why I am not initially guaranteeing more than two deals.
If the good deals have dried up
I don’t want to buy expensive properties. I buy single family homes with a total investment of 25,000.00 after improvements. (Read the page “My 5 year philosophy in borrowing money”). If I can no longer buy properties that fit within my criteria, I will either stop buying properties or find a new and effective way of making money with real estate.
I have listed a few reasons why I might not buy more than two properties with you in our partnership. Obviously, I want to do more than two and am excited to build real estate wealth with you. However, I have to be honest with you as to the possibilities of not continuing with you to purchase more properties.
3. Knowledge and assistance
Because I own so many properties, I have a wealth of knowledge that will aid you in becoming partners. I have already been through the “figuring everything out” years and you can avoid all of the pitfalls that rookie real estate investors fall into. I know what good prices are on fixing up residential real estate. I know the prices inside and out for siding, roofing, windows, flooring, cabinets, paint, electrical, heating, air, plumbing, etc. Being my partner will ensure that you never pay too much for any work done on a property.
I have a builders license. If we ever need to pull a building permit, we wouldn’t have to hire an expensive contractor because I have the license that is required.
I have a heating and air conditioning license. So once again, we can pull our own permits for any heating and air issues.
I own a roofing, windows, and siding company. If you’re a partner of mine, we can get any of these projects done at cost. This will save thousands of dollars over time which puts more money in OUR pockets.
I have a lawyer that gives me unbelievable rates. We will get his rates in our partnership as well.
4. Office work
My office will take care of the accounting, eviction issues, legal issues, paying the bills, and other types of “clerical” issues. For every property we have in our LLC, I will charge 35 dollars per month out of our LLC for office and Secretarial expenses.
We will give you access to our online banking information so you can monitor our bank balance and expenses whenever you want. We can also print out detailed information from our QuickBooks for you to review as well.
You might be wondering what type of return can I see in partnering with me through real estate. Here is an example of what we would expect your returns on your investments to be based on my experience as well as previous result.
There are 3 ways in which we should make money when we buy a property if we’re doing it right.
- We are patient in finding a good deal and so we earn instant equity by fixing up a property that is offered as cash only. I usually have an instant 15-20k realistic equity after buying and fixing up the “right” property.
- Passive income through paying off the asset. We are using the renter’s money to pay off an investors money and we are the recipient of the asset once it is paid off. If we’re paying 500 per month to our investor and let’s say 250 of it is going toward the principal balance, we’re earning passive income through not doing anything.
- Once the property is paid off, we will earn the cash flow. Not only do we have a property that we own free and clear, but now we get to reap the benefits of having a paid off asset which is generating us cash flow every month.
To illustrate how this works for you, will use Tim’s example from his 5 year philosophy explanation.
Your Partner buy-in: $6,500
Two Properties purchased for $16,000 with $4,000 needed in repairs paid off over 5 years.
Because we always are looking for values, we would expect a home we purchase at that amount to be worth at least $30,000 retail. The chart below shows your wealth in equity over a 5-year period.
In 5 years time, your equity as a 40% partner is $31,200 with an added bonus of $4,500 in annual cash flow from the properties.
This makes your Average Annual Return 84% as well as the additional bonus of cash flow attached after the payoff period.
**Previous performance does not indicate future results. Results of your investments may vary based on a number of market factors.