What are the Qualifying Criteria for New Partners?

We received several inquires regarding our recent efforts to acquire a MHP in N. California and specifically, about partnering with us on the deal.  The next few blogs will provide quite a bit of detail including our criteria for becoming a partner, the steps and timing a partner can expect in the acquisition process and the standard terms of our operating or partnership agreement.  Without further delay, let’s start with the criteria for becoming a partner!

Minimum Investment – $100K is the minimum amount a partner can contribute into the partnership.  We expect the total capital requirement of $400-$600K.  This means 3-4 partners and myself will participate in the next deal, which we plan to complete before the end of 2013.

Minimum Net Worth – A partner must have a net worth of greater than $1M, excluding the value of their primary residence.  These assets could include securities, equity in other real estate, CDs or savings and retirement accounts like an IRA or 401K.

Real Estate Experience – A partner must have some level of real estate experience and understand the basics of participating in a partnership.  More to the point, a partner must accept the obligations, risks and liabilities (along with the rewards) that come with property ownership.

Credit Worthiness – Good to excellent credit is essential to participating in the partnership.  Although the underlying asset is the basis for financing, lenders will take credit scores of the partners into consideration.  This is certainly true for the managing member (partner) and the remaining members (partners) with larger ownership interests in the LLC.

Alignment with Purchase Criteria – This is stating the obvious but the purchase criteria for the partnership and buyer must be aligned.  For example, if the partnership is looking to buy a MHP in Arizona, a partner based in N. California must be comfortable completing the process and owning a property that is geographically remote.

Alignment with Financial Goals – As with purchase criteria, every partnership has a stated set of financial targets and it’s important they align with the buyers financial goals and objectives.  This includes cash on cash return, return on capital at the time of sale, hold time and the exit strategy from the partnership.

Shared Values – We want partners who share our values, believe in using real estate to replace income at retirement and the desirability of MHPs.   In addition, we want partners who are smart, optimistic and bring more to the partnership than just their financial capital.

So that’s a good start to the partner qualifying criteria and the list might grow with the addition of a few items in the coming weeks.  In the next blog we will outline the steps and timing of the acquisition process.  If you have a question or comment, please reply below. If this post could be of value to someone you know, please LIKE and email or repost to Facebook, LinkedIn or your favorite network.

About John Vashon

I own a family business that invests in and manages our own portfolio of mobile home parks.
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