Private Money Partnering

Evaluating The Money Momma/Money Man

Chapter H (continued)

Use The Application For Investment
Determine The Comfort Level In Risk Taking
Evaluate As A Business Partner
Evaluate At Year-End

Forms:
Application For Investment
Earnest Money Agreement
The Risk Quiz

Question 4, what is the length of time you wish to hold the property? Does that matter? It matters a whole lot. For instance, John Schaub does long term deals with his clients of at least seven plus years or until the property doubles in value. That’s his game plan. Other people, like Ron LeGrand like to do it FAST. The faster the better, the shorter the sweeter. This is where you and your venture partner need to have common goals.

Do you have the right to know what a potential partner’s financial statement looks like? The point is that you need to know what you are dealing with. The partner that I want looks like this: when their financial statement gets by a lender, the lender looks and closes it, and says, “Thank you, that’s enough.” In other words, I don't have to worry about that, since available cash isn't an issue. But it is an issue for you to think about because you don't want to get snookered by someone that you think has money and really all they have is fancy talk and shiny shoes, or “all flash and no cash”.

Something else. You can't be cowed by somebody else’s money. If you’re the one putting the deal together, how much is your time worth? Again, we have the List of Tasks to think about. Changes are very great that most of the financial partners, or the Money Mommas/Money Men, can't do two of those forty-two tasks and do them well, much less forty two or forty three. You as Debbie or Dan Has-A-Deal are providing a body of knowledge they don't have, which is especially true the further you go from the real estate community.

Reviewing the “Application for Investment” together will also provide you with an opportunity to check your personal compatibility with them. Remember, joint venture partners have to be able to communicate with each other.

Determine The Comfort Level In Risk Taking
You might want to have them complete “The Risk Quiz” and use that as a vehicle of discussion to determine whether your styles are compatible and whether you share the same goals. Questions you'll need to cover include the following:

1. What is their comfort level in risk taking?
2. What is their money doing now?
3. Since they wouldn't want to tie up all your available cash, how
much can they comfortably handle?
4. What rate of return do they expect as a minimum?
5. What is their experience level with real estate?
6. How soon do they want their money back?
7. What is their “hot button” regarding investments?
8. What are they afraid of?
9. What will secure their comfort level?
10. How active or passive do they wish to be?
11. What do they expect of you? Are they going to be an active or passive investor, providing money only, or are they going to be involved in the management, direction, etc. of the investment?

Evaluating The Money Man / Money Momma - Chapter H (continued)