Sometimes You Can Have Too Many Real Estate Investors

A big part of the reason I emphasize doing a lot of research in advance so much is because of the time and money it can save by identifying a potential problem before important decisions and financial commitments are made. There was a recent situation one of the real estate investor clients I coach brought to my attention that is an excellent example.

He was about to be part of a four person investor group for which each person would commit $50,000 to start. As wonderful as having that opportunity could be, he expressed to me that one of the people was “not agreeable” to the majority of properties the group was already considering for its first combined property investment. It was understandable that he was worried that it may take them longer than he would like to reach that decision. He pointed out that he and two others were in agreement on wanting to pursue a couple of properties, but they keep getting shot down. Now it was my turn to help him create a strategy for dealing with the “disagree” investor, since that is what I was hired to do.

My answer was in the form of a question. “Why can’t the three of you in agreement form an LLC with $150,000?” My client paused and was not responding. I went on to add that there is a way all four of them could work together, suggesting that he continue to send the fourth investor investment proposals for her review. “If you come up with one she likes, form a separate LLC to accommodate that deal.”

From my perspective, that situation needed to be about my client being able to leverage his available funds toward a real estate investment he found viable. Having two other investors agree and wanting to move forward with him should not be taken lightly. It was possible that the properties the group of three wanted to pursue may not have been in range with $150,000 (instead of $200,000), the collective resources of three investors might be able to put something together to make it work. If not, the three know what to look for when finding another opportunity. Or, maybe the fourth person would agree with something they found and add her share to the down payment or possibly enable an entire purchase.

The thinking behind this solution is that my client’s “problem” opened up for multiple solutions. It did not have to block the LLC and investing path from happening. My client’s reaction was “What a GREAT idea! Thank you Dave!”.

All I did was share my philosophy of asking how something could happen instead of focusing on why it couldn’t. 

 

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