Let’s talk about how you can partner with other real estate investors to earn more money!

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Good surprise yesterday, a competitor of mine was in Toronto. Actually, I met a guy like a year ago. And he got back to me, he’s like, something to, you know, to offer you. And then we went on a call. And he’s like, you know, I don’t know, the market, since you know, everything is different here. Like, the laws are different, you know, the culture, the language, everything is different. So it’s like, well, I can’t seem to get in the market. So, you know, I’m looking for someone to partner up. It’s like, I thought of you because, because he knows me. And he knows I’m, you know, I’m good in the area. And he’s like, did you you’re interested in partnering up? I was like, yeah, sure, I’m interested. And the guy is bigger than me. And he’s doing a lot of marketing. And he seems to be no, structured. I know, he’s, he is coached by someone else. I can’t remember who he told me once. But, um, but yeah, he’s, he offered me to partner up. The thing is, is he offered a 5050 partnering up, and he’s doing all the marketing. Oh, actually, the managing, and I’m doing all the rest. So acquisition, you know, bring it all the way to closing. Okay. I was like, you know, I wanted to, you know, ask you, what do you think about this? Because I think it might be not that much 50% for doing all the work except the manager?
Yeah. Um, let me hear your gut response to it first, like, where does it sit with you? And then I’ll give you my perspective. And I have a couple questions, obviously, like, you know,
like, what response was, what marketing’s like on average? 30 to 40% of your budget. So I figured, I figured like a 6040. With the with the fair. Okay. That was my gut feeling.
So the first thing you want to do is do some math, right, like to make $100,000 in wholesale fees? How much marketing has to go out? And then how many leads are going to come in? How many deals get done? What is the average profit margin? Yeah, because if he’s 40%, that means he brought home 40 grand, but if he spent 2530 grand to get there, he probably won’t be very thrilled about that. No, exactly. Right. So but you know, you got to do some math, but then you got to be very transparent. If you are thinking you’re going down this path, and you got to be very transparent, like, hey, let’s do some real rough math here. If you want to go down this path, right? For us to make 100 grand, I would never do anything for less. And honestly, I probably wouldn’t want to do it for 100 grand, like, if we’re going to partner, the idea of partnering is to do double what you’re currently doing. Yeah. So here’s my perspective on partnerships, just so you know, most people get into a partnership for the wrong reasons. Most people get into a partnership, because they’re trying to fulfill a role they lack, right or a strength that are a weakness in their game, right. So for example, you might bring on a partner, because they’re really good with the operations, you’re really good in sales. Okay, I get that. I totally agree that, you know, if you’re more sales oriented, visionary, not so integrator operational oriented, then you want someone to fill that for you, because you’re not good at it. So that means you’re not going to do it, etc. Yeah. The problem I see with that more often than not, is you’re giving away 50% of your profit for that person. And that person can be hired for a fraction of 50%. Yeah, I tend not to be a massive advocate for partnerships. Not saying they can’t work, not saying this won’t work. But I tend to say people usually partner, because they don’t want to make the investment in their business to hire a role that could do the same job just as good, right? So their partnership means they earn income while the business earns right. Most people don’t want to, you know, outlay payroll to someone who could fulfill that job because they’re worried about operational costs. Well, I get that you’re at a level that like I would rather you outlay operational cost because you’re you have the ability to create income. You’re already there, that you can just look at a p&l and I’m happy to do this with you. And you can say, Okay, how much can I afford to pay this person so that I don’t have to do it and the only thing I’m doing is sales, sales, sales. Yeah, so when you get in, by the way, I’ve had a very similar relationship as what this guy is offering for you. So I’ve had what I’ve called, like a marketing partner. Yeah, these were local investors in my market. And I essentially just had to paint the picture out mathematically, because they didn’t want to do my side of the business, they didn’t want to deal with sellers, they didn’t want to negotiate didn’t want to do that. They’re like, I want to send out marketing. And I want to cherry pick rentals. That’s really what I want. And I said, Okay, so here’s how we can break this down. Because obviously, you’re not going to do this for free. Basically, we mapped it out that I my side, we get 65% of the deal, and their side would get 35%. Okay, that financially worked for a pretty good amount of time, except for the deals we were getting weren’t great rentals for them. And that’s really what they were trying to achieve. So ultimately didn’t work out. But because it worked out mathematically, in the sense of they, they got their 35%. And they were okay with that, because, you know, they spent the money and they would make a decent little profit, right, like for the amount of money they would spend based on the amount of deals we did in volume, they made some decent money wasn’t like life changing money. Yeah. But they weren’t, you know, they were happy with that what they realized wasn’t working is because we were getting deals that weren’t great rentals for them. So they’re like, this really isn’t working out, not because they were making money, it’s because they couldn’t cherry pick any of the deals, these deals were, you know, not perfect rentals for them, for one reason or another. Maybe they needed too much rehab, or whatever the case would be, maybe the price point was too high, whatever. So I would tell you, if you’re, it’s always good to be open to conversations. But if you’re going into it, because you think he can help you make more money? Could you do it in a different way? That I
guess I guess I could, what I realized is actually it could it could be beneficial in two ways. It’s it’s just gonna because he’s using channels that I don’t use, basically, that I could use, but I don’t. And you were pretty much both on top of AdWords and SEO. So and he’s like, I’m, you know, I’m willing to turn down my AdWords, just so so I’ll be I’ll stay on top. And he’s gonna he’s gonna, you know, put more money. And when I don’t use actually like more farming, sending letters. cold calling people?
Yes, I don’t.
So in that way, I was like, you know, maybe it makes sense. He’s focusing on channel that I only use and I would be focusing on channel that he’s not using?
Yeah. Well, I like that a lot. Right. So there were some more questions now that, you know, my general perspective about partnerships, I believe people get into them for the wrong reason. I’m not fully against them. Right, I had a partner for roughly 12 years 11 to 12 years of my business. And, you know, it’s not like, they didn’t end on bad terms at all. We just, he went in just, you know, he went in work with Kenton, you know, I stayed in the business. So I didn’t even end on that terms. My point being is, partnerships tend to end on that terms, partnerships tend to get ugly is because people always want more. They don’t feel like they’re getting enough, whatever the case may be. And especially when you’re playing at a high level, you have to, you know, wolves, right. And they, they want it their way. And they’re used to doing it their way. And so I’m cautious when people do that. But here’s what i do think is, I want to know more about what he proposed, like the fact that you just told me, he would ramp up a strategy you’re not even doing and he would reduce a strategy that you guys are competitive in. That’s a win win for you. Because what I wouldn’t want you to do is go stop your strategy, then, you know, partner with him, I would want you to write our model. Yeah. But that means he’s gonna not be a competitor for you. Well, that’s a bigger win. That’s almost as big as a win is getting new deals, right? Because now you’re really exactly that guy. So I like that. So where was like, what I always look at is, what are they trying to get out of this?
While he’s trying to expand in different markets, basically, you know, he’s in Toronto, he’s, he’s also in Ottawa. And he’s trying to get into Montreal’s market. It’s just he’s having a rough time, because everything is different. Laws are different and all that stuff. And he doesn’t know the market as much as the other area and he seems to have bad, you know, bad hiring. He can’t find anybody competent. So, so he went and asked me because, you know, I’m, I’m causing a lot of deals. So basically, he would
sell because he’s unfamiliar with the terrain. He’s saying, I’d rather partner with someone who’s good with the train. And at least I will get deals going
Yeah, exactly. He showed me like, how many deals he had and how many he had lost also, and he was closing, or maybe like, three out of 15 No, not even one out of 15. I was closing three out of 15, he was closing one, he was like, there’s something going on. It’s either like I can’t seem to get in the market. So I’d rather have you know, I’d rather have someone collaborating than competiting with in the same market.
Dude, I’m a huge collaborator. my entire career, I’ve collaborated with men in there not all names that you know, but like, me and Shawn have done a lot together. Right. I’ve done a lot of deals with Cody, you know, names that you do know, I’m just referencing them. But like, you know, there’s a guy Chris Iman out here, he’s kind of the Godfather out here. He’s been, he was one of the original Oh, geez down and like the auction courthouse steps. And so him and I have done like, hundreds of deals together. And I say that all the say partnerships can work as long as everyone knows, their, their rules their their role, right. And so, you know, for, for example, the guy Chris, I’m in that I just referenced, he’s a buddy of mine. And, you know, we had a very similar relationship that this guy is posing to you, because he was all courthouse steps in other investors. That’s how he was getting his deals, he spent not $1 in marketing. And he’s like, Hey, dude, you know, I know you do a lot of direct mail, I know, you do a lot of cold calling, like, I know, you spend your money, like, I have a lot of money. Like is there is there a way that we can put together where I finance the marketing, and we do deals together. And we did it, quite honestly. Um, but what ultimately happens is because there’s a split of the profit, his return becomes really thin. So that’s the cautionary tale there. And we actually did go 5050. So I forget what it was. But we were like, we were running a 20 grand a month together where he would, you know, I had my business running, we were still doing our own thing. But then he and I had a partnership, just like you’re talking about, where I think we were doing at least 20 grand a month minimum. And because we had to pull back his money out of every deal first, which is the right way to do it. So the marketing first dollars in or the first dollars back. So like, if we did a deal for five grand, I would pay my team, the commission, but I wouldn’t see any of the money. It goes right back to the marketing side. Makes sense? Yeah. So because we had to pay them back. And then everything was split. 5050 his return wasn’t great, right? You’d like he just couldn’t I mean, it was a good return in the in the sense of like, anyone in the world would say, Hey, I’m going to give you $1 and I’m going to, and I get back to right anywhere in the world would do that a lot. But for him, he was like, dude, I’m just, it’s not really moving my needle like to move my needle, right? So basically, essentially, he would put in 20 grand in make 20 grand. So he put in 20 grand and make back 40. Yeah, make sense? Yeah. He’s like, I’m only making 20 grand on this investment, while everyone in the world would love to do that. Right. Like, if you really think about it in 90 days, you’ve doubled your money. It’s crazy, right? in the real sense of investing. No one can do that. Right. But when you’re in our space, what we live in, like, that’s not even close to good enough. You know what I mean? Because essentially, he was gonna make 80 grand for the year. Yeah. And he was like, Dude, it’s just, we’re not there. Now, those weren’t the real numbers, the real numbers were 20 grand, and he would get back 40. But he’d get back 40 like, every 60 days. So he would have made 120 grand for the year. And he’s already running a very successful seven figure your business. So he couldn’t figure out a way to do math, right? Like it put an extra quarter of a million dollars in my pocket. Does that make sense? Yeah, but they only put money in so you get 50% but you only put your time. So for me it made sense. for him. It didn’t. And so, again, it didn’t end bad but he just had a conversation and he was like, Hey, dude, I just, you know, I can put that money into other things that I think I can just, it’s just not working right like in my career, I kind of get it like I’ve made a quarter million dollars you’ve made 120 Yeah, so I get it right. And it’s not that I’m doing anything wrong in terms of I’m not screwing him it’s just that’s how the money maps out. And so you need to be very aware of that going into it. He needs to be very aware of it going into it and you just need to be have honest conversations. I’ve had these partnerships before right. It’s it’s and then date before you get married. Like don’t do some new LLC and don’t do all that. say listen, all the leads come to me, right? I manage everything you literally are just the money. How did he want to structure it
with him literally only be the money cuz he’s He’s actually like this team would manage, you know, roughly and qualify them and as soon as you would send him,
so he is driving leads into his own team and his team qualifies them. Yeah. I don’t love that, because he’s looking at you to convert more than he is. But his team’s qualifying them. Yeah, pretty much I would say, then the reason why he’s not having much success is because his team isn’t doing a great job qualifying
could be actually, that’s a good point. I hadn’t thought about it. But yeah, it’s a good point, maybe his lead manager are not doing a very good job.
Yeah. And so I would, I would say the leads have to go directly to you. That’s the only option. You take it from enzyme to enzyme. He’s just the money.
No, yeah, that could be an idea. And then I could, I could work out, I’m 60 or 65%.
I like it better. I just don’t think he’ll like it. I don’t know. But you don’t need him. The nice part is you don’t need him. So it gives you a lot of strength to say, Hey, I’m open to this. But here’s how I needed to go down. Because otherwise, if your team’s qualifying the leads, well, your team right now is not doing as good as I’m doing. So there’s a break in the chain. So I need to qualify the leads and contract the leads, right? You’re just the money, then first dollars in or first dollars out. And then the split is 6040. Or whatever you want to negotiate if you want to do 5050 do it. I’ve done it. But like, you know, you just do the math, right? So if he puts 20 grand in, and you make 100 grand, he gets his 20 grand back. So there’s 80 grand left, he makes 40. You make 40?
Yeah, that could be interesting. I want to talk to him about this, because it could maybe made sense.
And you don’t currently have but is it also like there’s other things that you need to be aware of? is it taking away from your own business? If I don’t know how to have my own business? Would it be taking away? Like, would it be taking you out of your own lead flow? Like, would you be harming your own business to work on those leads? Would it on you while
potentially Of course, because it’s going to take, you know, some of my time, but it’s not going to it’s not going to take away the leads that I have. But it’s probably gonna take my time, though.
Yeah, well, if you don’t have enough time to work your own leads the way that you need to work your own leads, you’re going to hurt your own business. Does that make sense? Yeah, yeah, exactly. So you got to be aware of that, like, you got to look at all angles, right? And that’s why it’s nice that you don’t need him. But if you want to get this done, then make sure it’s on your terms. Like, hey, here’s what makes sense to me. Because it
honestly like my first feeling I had, like, I feel like he literally like it’s, I’m his last stop before he pulls back. Because he’s like, I’ve spent $100,000 on like cold calling and stuff like this. And it seems like he doesn’t get the return he’s hoping for. He’s getting a third of what he’s doing in Toronto. So basically, that’s my feeling on it for tonight. But my feeling was like, like, keep thinking about pulling back. And I’m just last resort.
Yeah, I asked him I mean, I’m just always really upfront, I would say that directly to him. Hey, dude, I, you know, I’ve been thinking about a meeting. And I’m kind of like, trying to ask myself, why would you want to be doing this, I get this feeling that you’re kind of you’re ready to just give up and pull the plug and be done. Am I wrong? Right. Just be totally transparent. You know, that’s the best way. We’re like, We’re adults, like, there’s no reason not to have an open conversation. Right? And let’s just say you’re not necessarily caught. You’re kind of like God Damn, that feel like there’s something up here. Like, there’s a trick to this, then you say that I’m not saying you do feel that way. I’m saying if you did, if you’re sitting there like, I feel like there’s a I feel like, he’s there’s a trick here, there’s something that you know, then you say it to him. So I feel weird about this right now. I feel like somehow it’s gonna pull me out of my business and not that you’re trying to trick me. But um, you know, My point being is just full disclosure, be as open as you possibly can with them. And if it feels good to do it, like I just had, you know, the, you know what I call like the Oh, geez, name’s Chris. Like, he’s been around so long, dude. He’s not gonna screw me. I’m not gonna screw him. Like it was just like, I didn’t really question whether we had the same intention. Right? It was like, hey, he does no marketing. I do a lot of marketing. So if he’s willing to invest his money, my team will get the deal done. Because Another thing is my team got paid off top. Right. So the way you would, you could potentially do that it is just you but like, my team makes 20% off top. The reason why my side was bigger than is, is because it wasn’t like 5050 in that sense. Makes sense. So my team got 20% of the gross number out of the gates, then he pulled back his marketing dollars, then I made 50% of whatever was left. That’s why our numbers were different. You know, again, he kind of just got to this point of like, definitely not the return I was really looking for. And I got it, I was like, I get it. I mean, it’s a great return in everyone else’s world, for you to be able to double your money every 60 days or so is like, Who wouldn’t do that? But, you know, in our space, we make so much money like you’re like, it doesn’t. It’s not really great. So anyways, that’s my thought, I think you go back to him have another conversation. I’m not 100% against it, I gave you my cautionary tale, why people go into partnerships. I it was a great partnership while it lasted. But you need to don’t make anything on it. Like don’t don’t go down that route. Just say, hey, let’s crawl before we walk. Right? Let’s go start spending some money, let’s get it routed directly to me, I need to control the lead because I don’t believe your your you know, underwriting them, right. Or your you know, your team is not managing the leads correctly. And that’s why you’re having such poor conversion. And I’m not. And well, another thought that I add is, since the guys seems to have a bigger team than I do. I was thinking like, maybe in a way, she could help me grow bigger, by like talking to them and like looking at his business, seeing how he works and everything.
Yeah, I think there’s there’s a play there for you to learn from someone who has a bigger operation. So I get that. But don’t, I probably wouldn’t say hey, you know, what I want to have from this is I want to learn from you like, because it almost gives him power, if that makes sense. Yeah, I want you to be in the one of power in this relationship. Now. While like, let’s just say you guys greenlight this, and you guys agree on it. While it’s happening for you to say, Hey, dude, you know, I want to, you know, kind of take a look your operation, whether whether it’s going to the office, or like, I kind of want to see how you got to the place you’re at with your business. Because at this point, it’s just me now I’m really good, but like I am looking to grow and want to kind of see like, but save that for a little bit. let that happen more organically than making it part of this initial talks. Makes sense? Yeah, I get it. Because right now you’re in the place of power. He’s coming to you. Yeah. So keep that power on your side. And you’ll be able to like, trust me, once you guys are starting to do this, you’ll talk more, you’ll be able to naturally in organically ask questions that you will start to learn from right. Like the thing about people that grow. Listen, this guy could be murdering it, I don’t know. But I learned the hard way. Like, I don’t know, eight years ago, I jumped into Texas and tried to, you know, do Dallas and DFW and Arlington all these markets, and I just couldn’t I couldn’t figure out a way to get the profitability to where I needed it. Now I’ve jumped into like Oklahoma City, and I’m murdering it. I’m getting like a 5x. But I now know what I was doing wrong then. So just because people are in different markets, I wouldn’t, you know, just assume they’re crushing it. Just because they say they’re in different markets. You know, there’s a lot of people say all this and the other but, so. Okay, good. Good. That’s the Wednesday wraps up that part for you to say, Hey, dude, you know, I want to, you know, kind of take a look your operation, whether whether it’s going to the office, or like, I kind of want to see how you got to the place you’re at with your business. Because at this point is just me now I’m really good. But like I am looking to grow and want to kind of see like, but save that for a little bit. let that happen more organically than making it part of this. The initial talks. Makes sense. Yeah, I get it. Because right now you’re in the place of power. He’s coming to you. Yeah. So keep that power on your side. And you’ll be able to like, trust me, once you guys are starting to do this, you’ll talk more, you’ll be able to naturally in organically ask questions that you will start to learn from right like the thing about people that grow. Listen, this guy could be murdering it. I don’t know. But I learned the hard way. Like, I don’t know, eight years ago, I jumped into Texas and tried to, you know, do Dallas and DFW and Arlington and all these markets and it just couldn’t I couldn’t figure out a way to get the profitability to where I needed it. Now I’ve jumped into like Oklahoma City and I’m murdering it. I’m getting like a 5x. But I now know what I was doing wrong then. So just because people are in different markets, I wouldn’t, you know, just assume they’re crushing it. Just because they say they’re in different markets doesn’t you know, there’s a lot of people say, Oh, no, this that and the other but, so. Okay, good. Good. That’s good. That wraps up that part.