Real Estate Investing Basics

How I Choose My Real Estate Partners (and the criteria I use)

193 Articles Written

If you really want to make six-figures in this business you're going to need partners so you can leverage your time. Well, last week I wrote about one of my partners and how we’re getting ready to hopefully close a huge wholesale deal. So, this week I want to tell you how I go about selecting my partners.

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Right now I have only a few partners who I work with and trust. And even through I trust these people, the first rule of partnering is to always do it on a per deal basis. I would never form an LLC with someone, or make them an “official” partner in your business. You want to partner with them one deal at a time, that way if anything goes wrong you’ve learned your lesson and you never have to work with them again.

When I first found my partners, most of them ended up approaching me about partnering. But it doesn’t matter if you approach someone, or they come up to you, the selection criteria will remain the same. You could approach a person because they have the money and you have a hot deal which requires money… or they could approach you because they want you to put up the money.

Anyway, here’s how I evaluate a real estate partner:

1. Are they responsible and reliable? Do they show up on time? This is the most important criteria and the one that will eliminate 99% of your problems. If you’re thinking about partnering with someone and you decide to meet at a restaurant to talk about a deal and they show up 15 minutes late, walk away right there. Or, if you’re supposed to have a 3:00 phone call and they completely forget to call you, then never ever partner with this person.

I’m always amazed at the number of people in this world who are unreliable. If someone can’t show up for a meeting on time, or forgets a phone call, then think of how tough it will be working with them on a deal. I learned this lesson the hard way. I once had someone approach me with some great deals that potentially could have made both of us lot of money. This person didn’t follow through on anything, but I kept working with them because I got greedy. Finally, I had enough and walked away (and of course none of the deals closed).

Nowadays the first time someone is late or misses a deadline, I immediately cease working with them. Just last month I was thinking about working with someone new. We had a phone call at 6:00pm. He called me about 25 minutes late. I flat out told him I couldn’t work with him because he called me late. He first got offended, then he apologized. It didn’t matter, you can trust flaky people.

2. I run a background check (most of the time). You see, I like to see if people are going to “flinch”. Every now and then I’ll get approached by someone who I don’t know from a hole in the wall. I tell them I will have to run a background check on them before we go any further. Now, if someone is honest why would they care if I did this? They shouldn’t, especially if I’m the one paying for it. Of course if the person is a fraudster that’ll get rid of them. Also, you don’t always have to run the check, you can just bluff about it.

Check ID’s…

3. Check ID’s at all times. Again, if you’re approached by someone you don’t know, have them fax you a copy of their driver’s license and make sure the names match up.

4. Do they sound knowledgeable? You want to partner with someone who is actually going to close deals. You and I both know the majority of investors talk the talk but don’t walk the walk. Make sure the partner is going to produce, whether it’s supplying money or deals. Have no patience for people who aren’t going to make you money.

5. Never get too friendly with them. This is a business. Leave emotions at the door. If a deal goes sour you want to be able to walk away from this person (which is hard to do if it’s your best friend.)

6. Always have everything in writing. Have a joint venture agreement which states all proceeds from the deal will be split 50-50.

Talk to other investors…

7. Find out everything you can about their reputation. Talk to past partners, talk to people who know them at your local REIA meetings.

Only one time in my life did a partnership go sour. The person tried to rip me off of about $30,000. Needless to say, lawyers got involved and everything was taken care of. Of course I will never again work with this individual.

Even if you think some of the things I listed sound drastic, just wait until someone tries to steal $30,000 from you and you’ll realize why you need to take every precaution possible when choosing a partner.

Photo Credit: gopal1035

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    Replied over 10 years ago
    Jason, Great check list. I would like to add returning phone calls. With rare exception, if I call someone twice and the person doesn’t call me back — adios! A lot of my associates think I’m being harsh but I don’t feel that way, at all. How a person receives your entreaties speaks volumes about their character.
    Replied over 10 years ago
    Sounds like good advice. You might add that it would be wise to avoid as if they had Bubonic Plague, the “Seminar Guys” and those who email links to ebooks or webpages with a lot of flash ads touting “Free Short Sale Course”.
    Joe Ziolkowski
    Replied over 10 years ago
    Hey Jason, Thanks for the great article. This is a subject that I haven’t seen get the attention it deserves. The gurus talk all the time about partnering with people, but rarely do they ever talk about the down and dirty, in the trenches type stuff like this. Thanks again! Joe Ziolkowski
    ken luckett
    Replied over 10 years ago
    Thanks for the info. I currently work 40-50 hrs/wk and need someone with cash to help me as I sometimes run into empty houses (as I work out in the field) or foreclosures not listed yet through a Realtor.
    Replied about 10 years ago
    For anyone who reads this article in great length must be on the lookout, no? I am an REI. I lack experience but not know how and I am looking for a worthy partner willing to make a strong contribution to my business plans. It consists of acquisitioning over 100 rental units (SFR’s and Apt’s) in year one of my plan and 150 more by year 2. By the end of year 3 we will be debt free and profitable. I am targeting one specific location where my the market is only 5% of the anticipated market size of over 4000 rental units needed in the area. A fantastic opportunity not only for my partner, but also for any Investor funding our deals (need that too). With drive and persistance this WILL work.