{"id":631,"date":"2022-02-28T20:12:31","date_gmt":"2022-02-28T20:12:31","guid":{"rendered":"https:\/\/www.msfiremama.com\/?p=631"},"modified":"2022-02-28T20:16:45","modified_gmt":"2022-02-28T20:16:45","slug":"msfire35","status":"publish","type":"post","link":"https:\/\/msfiremama.com\/msfire35\/","title":{"rendered":"Partnership Paradigm: Part 2 – Up and Running"},"content":{"rendered":"\n

This is part two of a three-part series documenting the creation, maintenance and ending of a partnership we had for our first real estate investment<\/em>. Read Part 1 here.<\/a><\/em><\/p>\n\n\n\n

Our Colorado Springs properties were in our hands the spring of 2018 and we were excited to get investor experience. It wasn\u2019t long before the marketing photos were taken and the main house and the carriage house were listed on AirBNB and VRBO.\u00a0<\/p>\n\n\n\n

At this point, my involvement with the investment became minimal as we awaited the arrival of our first child. Chad took on the responsibilities of checking the management reports. We met with our partners a few months later to discuss the property and operations. Later, we did monthly video calls.<\/p>\n\n\n\n

Chad reviewed the budget and all the backup whenever the reports popped up in our inboxes. This included information from the property manager (PM) that our partners hired, maintenance items (if a lamp was replaced or if any repairs were needed) and bills from utilities to taxes. <\/p>\n\n\n\n

Chad had a hard time figuring out where the data was coming from and how it added up. He reached out to our partners for clarification. They did not immediately have answers when we questioned the spreadsheets the PM had issued. We asked for clarification and either the PM refused to provide answers or our partners did not put the time in tracking down the information. Eventually, we did hire a new property manager, which we hoped would mean greater transparency. <\/p>\n\n\n\n

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The more you know, the more prepared you can be. The more clear your expectations, the easier it is for everyone to understand what they need to do. <\/em><\/p><\/blockquote><\/figure>\n\n\n\n

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When the financial reports were issued monthly, profits were also disbursed. In several instances, those funds would need to replenished the following month to cover expenses. We agreed to have the reports and the profit disbursements quarterly to prevent this. Additionally, we wanted to give our partners more time to prepare the information so they could get information about items they knew we were going to ask about. We hoped this would help with transparency and diligence in preparing the books.<\/p>\n\n\n\n

By January 2019, Chad and I had enough capital saved to purchase another property. We scheduled a meeting with our partners to strategize for our next investment.<\/p>\n\n\n\n

Our partners surprised us with the news that they were not interested in managing another property. They planned to start their own business in a different industry. We appreciated their being very clear about the future of our partnership. We were disappointed, but later realized it was a blessing in disguise.<\/p>\n\n\n\n

Chad and I began looking into other types of real estate investments and researching strategies and markets.<\/p>\n\n\n\n

The year went by and we hoped the quarterly reports would become more clear. However, our questions regarding bookkeeping continued to go unanswered. Chad continued to struggle to understand how the information was compiled. Frustrated, Chad spent a few days during Christmas break to create a spreadsheet that would help better organize where money was coming in and how it was being spent.\u00a0<\/p>\n\n\n\n

Despite the new spreadsheet, the bookkeeping did not improve and it was a sore point to request the information be populated so we could review the financials. <\/p>\n\n\n\n

Chad did his own audit and found that our partners took withdrawals from our business account, only to put them back as it seems that they were confusing their other business accounts with this one. We asked questions about some of the money taken out and the answers were not clear. While bookkeeping was supposed to be our partners’ responsibility, they did not put the effort in to sort out the issues. Chad was able to track down the origins (and returns) of the funds. When discrepancies were found or it seemed that our partners had taken money out of the business account in error, they didn’t challenge us and agreed to reconcile the mistakes.<\/p>\n\n\n\n

We continued on with Chad reviewing and correcting the financials as much as he could. Then the year 2020 was upon us. COVID-19 ransacked the world and crumbled the short-term rental business. The final chapter of our partnership began as we navigated real estate in a pandemic.<\/p>\n\n\n\n

INVESTOR MISFIRES<\/strong><\/p>\n\n\n\n

The common theme is we did not request enough information at the start of our partnership about how things would look once we started operations. We should have learned more about how partners operated their own short-term rentals with regards to:<\/p>\n\n\n\n