Should You Have a Real Estate Partner? Having a Partner In a Business Deal Can Prove Highly Effective…It Can Also Go South Pretty Fast

imagesIf you don’t have enough money for a project, a partner eliminates that issue. They can also bring things to the deal that you don’t have and can’t provide. For example, if you and your partner both have experience but no money, it’s not much of a partnership. However, if one has the funds and the other has years of making deals, thats a great start for a solid partnership foundation. Keep in mind, that just because a partner has money to bring to the table, does not a partner make. Here are some inside tips from the pros when it comes to partnership in real estate.

You must have the same objectives. Before you partner with someone, you must make sure that you share the same objectives regarding real estate as they do. This can be in terms of how long you plan to hold on to the property, how renovations are done, and what types of properties you like to buy. Your partner should have a similar objective regarding the nature of these areas. If you do, then it it is time to discuss the real possibility of a partnership. images-1

You must discuss an exit strategy. For example, if you purchase a house 50/50 with your partner and are struggling to make ends meet on your end five years later and you need your half of equity, how will you get out of the deal? There are a few options. You can sell the property, buy your partner out, or find another partner to buy our your current one. OR, give your partner a loan. The point is,  you are going to need to have a written partnership agreement which will state how you will value the property if something happens.

You must also play nice. Just because someone has a billion dollars doesn’t mean you should take it and spend every dime. In order to form quality partnerships, you should spend the money very frugally. Don’t ever put someone’s money into a deal that you wouldn’t put yours into. Also, take a fair percentage of the profit. If you didn’t do a whole lot of work, don’t demand a profit that you know you didn’t earn. You don’t want to burn bridges when it comes to real estate investing. images-2

Of course, this list wouldn’t be complete without adding communication. Give updates and notice of what funds are coming in, and which are going out. Keep them updated on the property. If your partner cannot reach you when they want or need to, they are going to start wondering why, and ultimately lose trust in you as they grow suspicious.

2 Comments

  1. I think that real estate partnerships can be a beautiful thing. One thing I will say, don’t do it just because you need more money that you can’t get by yourself. You need to know the person for a while, don’t just choose someone because they’re able to put up funds. You need to know someone’s character well before you get into business with them. Even friends that go way back who get into business together end up never speaking again after a horrible business deal.

  2. Totally agree. I’m not involved in real estate investing at all, but I do have a friend that partnered up with his best friend from high school whom he hadn’t spoken to in a long time. He saw him at a real estate convention after years of losing touch, and they decided to purchase an industrial property together. He ended up getting majorly shafted. Be careful.

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