You’re standing at the altar. You look into the eyes of the person in front of you and think “I wonder what this person does for work.”

Probably not. At least I hope not. 

Of course, you know what the person you are going to marry does for work. Hopefully, you’ve spent more time getting to know that person and you know a lot more about them than that.

Similarly, you’ll want to know a few essential things about anyone you enter a real estate investing partnership with before you sign the paperwork and transfer funds.

Here at Flow State, we put our money in Notes for many reasons and recognize that this form of real estate investing is not known by most people (even experienced real estate investors). We hope you’ve had plenty of time to learn about our business strategy (taking Non-Performing Notes and making them Performing by helping borrowers get back on track with payments and keep their homes). 

Ideally, you’ve asked questions on our initial call and have heard us answer all your questions.

However, we want everyone to be sure they know these 5 essential frequently asked questions (and answers) before we work together. Basically, these are the ones that we never want to slip between the cracks.

Answers to Important Questions for Investing in Non-Performing Notes

How Does Flow State Get Paid?

We don’t make money until you make money. At Flow State, we aren’t paid until we get a return for the partnership. Distributions are structured to first pay back any initial capital contributions first. After that, we split our returns 50:50 with our partners, which is an industry standard in Notes. We do charge a Note analysis fee per Note (from $500 – $1000) that is non-refundable. Beyond that, our income is based on our performance.

We believe that the fees associated with stock market investing are ridiculous. Similarly, some real estate investing opportunities come with extra fees for operators or return structures that may not be in your favor. Always ask about how your partners are getting paid to know if they will be the best stewards of your capital.

How Long Will My Capital Be Held and How Liquid Is This Investment?

Ok, that is 2 questions but they go together. We aim to have your capital returned in 12-18 months. However, this can be shorter or longer (generally up to 2-3 years). These partnerships are typically shorter than many other forms of real estate investments.

During the duration of the partnership your capital is illiquid, meaning you can’t pull it out without consequences. Our Partnership agreement paperwork outlines what would happen if you needed to exit the partnership prior to the sale of an asset.

Will I Receive Passive Monthly Income?

It is best to assume that all returns will be distributed at the end of a partnership. This means that there may not be any monthly distributions. In the case where we help a borrower start making monthly payments again, we will distribute those payments to you monthly.

If your primary investing goal is to have monthly income immediately from your real estate investments, then a Note Partnership is not a good fit for you at this time. However, since capital hold times are shorter than many syndications or even rental property investments, it is possible to build up an amount that can be used for monthly cashflow quickly.

The large upside is also what makes Note Investing great for building wealth with velocity. Getting money working hard and quick and then reinvesting the profits can get you to retirement sooner than you thought possible.

What Types Of Communications Will I Receive From Flow State?

You’ll receive investor communications both before we purchase the Notes (Phase 1) and during the management of the note and ultimate sale (Phase 2). 

During Phase 1, you’ll review the Due Diligence Report that summarizes the asset and why we believe it is worth purchasing. You’ll take the time to review the partnership paperwork during this phase as well before signing and transferring funds.

Phase 1 is broken into 3 steps that take from 2-4 weeks to complete:

1. Submit Letter of Intent for Capital Commitment
2. Review Due Diligence Report and Asset Summary
3. Sign paperwork and transfer funds.

Learn more about the 3 steps to join a Note Partnership in our video below. 

In Phase 2, you’ll receive 4 types of communication from us:

1. Note Partnership Guide – upon closing
2. Progress and Financial updates – monthly
3. Special Discussion Alerts – several times throughout the partnership duration
4. Schedule K-1 – annually

You can find more details in our article on What to Expect in a Note Partnership, or in the video below. 

What sets us apart are our special discussion calls. To maintain your “active” role in the partnership, we will jump on a few calls to discuss special events, such as altering the exit strategy or deciding to sell the asset. These calls are also a great chance for us to check in and answer any questions you have.

Check out our video on what types of communications you can expect during the Note Partnership for more details. 

You can read more detail about the communications you can expect to see during these two phases here. 

We hope that your experience joining a Note Partnership with us is so fun (and lucrative) that you want to keep coming back for more.

Is this an “Active” Or A “Passive” Investment?

Our partnerships are considered “active” for our capital partners, but we don’t want to confuse “active” with “lots and lots of time.” 

The bulk of your time will be spent in understanding our business strategy and vetting us as operators. We want our partnerships to be long-term relationships and we take the time to get to know you, your goals, and your expectations prior to entering into any Note purchases. Once we get past this stage, we don’t expect you to have to spend much time.

This type of entity structure allows us to work with our capital partners individually and get better returns (no massive legal fees of the PPM). While we at Flow State do the bulk of the work, we’re technically all active in the partnership. 

We do this by all jumping on calls to discuss special topics, like when we decide it is time to sell. We’ll provide an overview and ask if you have any input or questions. Typically, we only have a couple of these calls throughout the partnership.  Mostly, we enjoy these calls as a chance to check-in with our partners about their experience.  

We also believe that using the “active” and “passive” labels falsely labels an investing strategy. ALL investments require some of your time. In fact, many “passive” investments may require much, much more of your time than a Note Partnership if there are problems, poor management or decisions, or terrible communication. Or, they may provide you just mediocre returns.

We want every partner to understand these answers before joining us. However, there are more questions you can (and should) ask before entering any real estate investment with a partner. Partnerships can help you build your wealth without spending much of your time. 

Recap

Partnerships are one of the best ways to leverage your money to grow quickly. The bulk of your time should be spent in vetting that partner and making sure their business strategy is a good fit for you and your goals.

If you are interested in discussing partnership opportunities with us, join our Investor Circle and we’ll send you a link to schedule a call with us. We love sharing this investing strategy with more people and hope to chat with you soon!