{"id":655,"date":"2022-03-18T14:41:07","date_gmt":"2022-03-18T14:41:07","guid":{"rendered":"https:\/\/www.msfiremama.com\/?p=655"},"modified":"2022-03-18T14:41:07","modified_gmt":"2022-03-18T14:41:07","slug":"msfire36","status":"publish","type":"post","link":"https:\/\/msfiremama.com\/msfire36\/","title":{"rendered":"Partnership Paradigm: Part 3 \u2013 Where It Ended Up"},"content":{"rendered":"\n
The Year 2020 brought mayhem to the world and touched every aspect of life from supply chains to real estate to employment. With the concern of COVID impacting renters, many short-term rental activities ground to a halt. New cleaning protocols, masks, hand sanitizer and toilet paper mania rocked everyday life.<\/p>\n\n\n\n
Our partners approached us about ending our partnership early in 2020. The results of our investment were becoming clearer as time passed. Our partners\u2019 projections for revenue were off by nearly 30 percent. Projected expenses were on par from a cost perspective, but ate about 67 percent of our revenues, instead of the projected 50 percent. <\/p>\n\n\n\n
It mean a smaller share of profits to split in our 70\/30 arrangement. Our partners were not making a lot of money from this investment for the time they were putting in. We understood why they wanted out. <\/p>\n\n\n\n
Per our operating agreement<\/a>, the guidelines and responsibilities of our partnership, they had to request the dissolution as only Chad and I had the power to trigger it. <\/p>\n\n\n\n The operating agreement stipulated that upon ending our partnership, the loan on the property had to be paid off first, and then the remainder would be divided 70% to us and 30% to our partners. They were also our real estate agent and could earn a commission on the sale. <\/p>\n\n\n\n Road to Sale<\/strong><\/p>\n\n\n\n The first step toward selling our investment was converting it from a short-term rental to a medium-term rental. The short-term rental demand halted with the COVID lockdown and our partners were able to rent the properties to traveling professionals. This helped keep our finances in the black, or close to it.<\/p>\n\n\n\n Then it was time to look at the numbers. In 2018, we purchased the property for $470,000. The new valuation was anticipated to be around $520,000.\u00a0 Chad started plugging in costs for taxes, realtor fees, closing costs, loan payoff etc. We worked backward to see what sale price we needed to cover what we and our partners hoped to gain from divesting the property.\u00a0<\/p>\n\n\n\n After the loan was paid, then we could look at how to divide whatever was left. Our partners wanted their initial investment paid back: $14,000. We also wanted our initial investment back – the down payment of $123,000.<\/p>\n\n\n\n If our partners received their $14K back from the sale AND received a commission, they would make more than 100% return on their investment, in addition to profits earned from our two years of ownership.<\/p>\n\n\n\n