Should you start your own ‘Monopoly Project’? Should you start acquiring rental properties? In this series we examine the ways to start your own “Monopoly Project”.
In our first post of this series, we explained the first thing you should do is to get into shape – Financial Shape. Then we showed how and why we started our MonopolyProject in ‘Start Your Own Monopoly Project – Step 2: Our Way’. Then we explained a method you should never use: Step 3: OPM – Other People’s Money. In “Start Your Own Monopoly Project – Step 4: House Hacking – Joey Sleeps in the Sink” we took a side street and looked at “House Hacking”.
Let’s take another side street and look at “Get A Partner”.
When we did our Monopoly project, ‘Start Your Own Monopoly Project – Step 2: Our Way’, we didn’t get a partner. Why? Because, if you don’t need a partner, don’t complicate the situation with a partner.
Why a partner is a bad idea:
- You must share the gain.
- It will slow you down. Decisions become a big deal.
- You will argue.
- Makes the exit strategy complicated.
Why a partner is a good idea:
- Partners bring different strengths to a problem. Some problems require the multiple strengths of a partner/group.
- It will slow you down. Yes, and you will avoid some bad decisions.
- You will argue. Sometimes having a healthy debate brings out some excellent ideas and solutions.
- It aligns the objectives of the team to be in the same direction.
- There are some deals that are too big for “one”.
- It’s more fun.
All of the above “good idea” attributes are dependent on having a “good partner”. A bad partner is not going to help with the above.
What should we do to make sure we get a “good partner”? We should agree ahead of time on what our objectives and methods are. How?
We wrote and signed an “Agreement in Principle” that documented these objective and methods. It anticipates those situations that arise such as:
- “I thought we were going to do x.”
- “I never agreed to that.”
- “I don’t want to do it that way.”
Here’s our draft Agreement in Principle.
Yes, my partner is none other than our TheMonopolyProject real estate Broker/Agent Jeff Sutherlin.
Jeff satisfies all the criteria of a “good partner”:
- Most important: Partners bring different strengths to a problem. Jeff knows the buying/selling process inside out. He was ‘on the team’; now he ‘is the team’, see #4 below.
- It will slow you down. I need to be slowed down. Jeff is a calming presence.
- You will argue. We have done before so but now it is “easier” because of #4.
- It aligns the objective of the activity to be in the exact same direction. Our efforts are now perfectly aligned. We share the exact same risks and rewards.
- There are some deals that are too big for “one”. I can do more deals now with my “limited” $100,000 initial investment.
- It’s more fun.
How does the Agreement in Principle help us? It documents the key objective of the relationship, sets the boundaries of the partnership and is realistic about the future.
- This is a 50/50 relationship. No esoteric agreements about who brings what to the table.
- We’ll set up a legal entity in the form of an Arizona LLC with a well written “Operating Agreement”. “While not legally required by the state, having an operating agreement will set clear rules and expectations for your LLC while establishing your credibility as a legal entity.”
- We will provide our “best efforts” to this but are free to go about our other businesses and personal relationships. This is NOT a “marriage”.
- We understand that this will take a long time; 5-10 years and may not yield immediate positive financial results. We are in it for the long run.
- And most important, we will operate in a “good faith” legal manner and a “good faith” Christian manner. The Bible is full of advice directly applicable to business dealings as shown in the Agreement in Proverbs 16:3, Luke 14:28-30, Colossians 3:23, Proverbs 13:11, Proverbs 22:29, Proverbs 21:5, Luke 16:10, Jeremiah 29:11, Proverbs 19:17, Philippians 4:6, Proverbs 22:16, 1 Thessalonians 4:11, Luke 19:13, Leviticus 25:14, Matthew 25:23, Proverbs 30:7-9
Next: we make our first offer as partners on what is the PERFECT Monopoly house.