Partnerships or Solo?

Question

I am curious to know what investors have a 50-50 partner ship with all properties purchased.  I want to go into RE investing on my own but I have a friend who is graduated from Grad school come May and is pretty much ready to buy properties with me.  What are the pro's and cons of a Partnership?

My thoughts right off the bat would be more cash on hand, more properties to buy, less risk(as far as if things went sour one or the other could cover the mortgage payment/expenses), Two people to feed off each other a motivate each other, half the work load.

CONS: Split all profits down the middle, possible arguments (but what would you expect).

To me it seems that a partnership has more pro's than cons and could be better than going in by myself.  Both of us have excellent credit and cash reserves ready for purchases along with solid jobs right out of college.  What are your guys thoughts?

Steve L. · Answer

I am partnered with my father.  We both have different skill-sets and a lot of the same ones.  Between us we do what needs to get done... sometimes he does WAY more sometimes I do WAY more.

We disagree, but we are family first. At the end of any discussion, argument, etc we know that we are not willing to put our family relationship on the line we typically can come up with a solution. This type of relationship is not for most people...

Overall, I've been involved in numerous partnerships.  Some have succeeded, some have failed.  If you're going to work with a friend, I'd suggest a lose arrangement.  Before you do anything complicated do one property together... see how it goes.  After a couple, you will know if you can work with the person or not.

Trust is key...

Good luck.

Mike Mitchell · Answer

I know it seems tempting to take on a partner.  Why would one do this?
1.  The other guy brings money to the table
2.   The other guy brings a lot of skill to the table (perhaps making up for your lack in some respects.
3.  It seems like it will be fun.

In my view, I think you should do this on your own.  Make all of the decisions.  Control everything and possess everything.  You can arrange financing even if it means growing slower.  Please don't do a partnership, run from it!!!!!!!!
Ask yourself, and by honest, why another person would want to take you on as a partner.  Then ask why you would take on another partner and refer to your line about disagreements.  Why would you even think about it?

Robert Mack · Answer

J,

From reading your blog it seems like you are running your business with your family.

Did you sit down before any business plan was written and talk about the reality of going to business together with family?

I'd like to partner with my father, but one of my main concerns is what you wrote about having a partnership not work out and then leading to personal problems...

J Scott · Answer

The biggest risk with a partnership is not having a common view of the company strategy.  When one person has one set of expectations for where the company will go and the other person has differing expectations, it can make decision making very difficult.

Even if you both agree on the direction of the company from the outset, things often change, and once they do, it can be very difficult to break up a partnership in a clean manner.

If you're going to enter into a partnership, do so because the other person can provide something to the team that is invaluable...something that you couldn't possibly provide yourself (could be money, expertise, relationships, etc).  Don't do it just because you think it would be fun working with another person or because someone else needs you.

Most partnerships don't work out, and if there is a friendship involved, oftentimes the friendship won't survive a partnership dissolution.

Just my $.02...