Real Estate Partnerships: How to Find a Great Fit & Work Together Towards Success
[Note: While the concepts discussed here are in relation to wholesaling, the principles can be applied towards finding any kind of real estate partner — or a business partner in general. Enjoy!]
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Wholesaling seems like a one man job on the surface. You hustle, you network and you make money. You keep doing that over and over and over again. That's the perfect worldview of wholesaling. The fact is that life gets in the way ALL THE TIME. That is not good for wholesaling because if anything puts a halt to the hustle, the money stops.
If you find that life gets in the way too much, then having a partner might be the right way to go. That is the situation that I found myself in.
Do You Need a Partner?
To be honest I never thought I needed a partner. One day I was having a candid conversation with my coach wondering how I was going to get what I needed done, done. We brainstormed quite a few productivity ideas, when suddenly my coach got that look on his face like an idea just popped into his head. He then said:
“You need a partner, Scott.”
I’m not a control freak by any means, but I really don’t like answering to anyone. I always feel like I have to justify what I’m doing. I wasn’t getting the results as a wholesaler that I wanted, so I figured why not?
You might be facing the same problems and roadblocks that I was facing. We must be honest with ourselves… we can’t be supermen. Ask yourself these simple questions to see if you might need a partner:
- Do I have the time to be a successful wholesaler?
- Do I have enough money for marketing?
- Am I lacking a certain skill?
These are the questions that I’ve found to be the most relevant. You may actually figure out that you need to hire an assistant rather then find a partner.
Partner vs. Assistant
There is a distinction between needing a partner and needing an assistant. To me:
A Partner will be able to complement your skill set. They will be strong in an area where you are your weakest. You get a partner when you are lacking in some area, such as Time, Money or Knowledge. My partner and I worked out great because I lacked the time to do many parts of the wholesaling, and my partner lacked the finances. In most cases this will be the reason people get a partner.
Both you and your partner should be working on the business and not in it. That is a job for an assistant.
An Assistant will be hired to take on aspects of your business that you find tedious. These tasks include:
- Data entry
- List gathering
- Putting together direct mail
- Answer the initial phone calls from sellers
- Cross-checking lead lists
- Putting out bandit signs
- Creating your offer sheets
- Coordinating closings
- Entering lead information into your system/spreadsheet
- Organizing files
All of these items must be done. However, they don’t have to be done by you! My coach told me one time that I should only concentrate on Money Making Activities. That is, anything that will directly result in increased earnings. This includes:
- Talking with sellers
- Talking with buyers
- Making offers
- Signing contracts
- Coming up with creative ways to buy properties
- Get educated
Your job is to interact with people, build your reputation and get smarter.
What to Look For in a Partner
You can’t pick just anyone to be your partner and expect to succeed. Partner skill sets compliment each other almost perfectly. I will tell you this: the perfect partner is not easy to find. Sometimes it takes luck, sometimes it takes someone else to find your partner for you. That’s what happened with me.
Here’s what you should look for:
Someone who is strong in your week areas. There is no sense in having a partner who duplicates what you are good at and who is weak with what you are weak at. Let’s be honest: we are usually weak at a task because we don’t like doing it. We all tend to gravitate towards things we like and are good at.
Someone with a competitive advantage. This is not a necessity, but it’s damn nice if you can find a partner who already has solid experience with marketing, sales, rehab or general market knowledge. Not only do these people bring their knowledge to the table, but also their relationships and contacts. Those are gold!
Your personalities are compatible. I’m not saying you have to be best friends or anything, but you have to get along. My partner and I formed a pretty good friendship. This helps us get over many disagreements in a civil manner. We both want the best for each other.
You have the same morals. This is another part of compatibility. I don’t like working with people who don’t share the same morals as I do. I like to treat people a certain way, with a certain level of respect. If my partner can’t match my morals, then I’m not going to feel comfortable having him talk to our potential clients.
You share similar goals. They don’t have to be exact or match up completely. Everyone has a different agenda, but if you and your partner have similar short term goals, then it will work.
Someone with the same level of drive. This is pretty self explanatory. Real estate investing is hard work, and if you and your partner work at different speeds, you’ll drive each other crazy.
They get things done. And finally, I like to have a partner who just gets things done. This unfortunately is almost impossible to judge beforehand. It will become evident pretty quickly once you become partners, though. If you always have to intervene to finish a task or keep things moving, that’s your hint.
How to Find a Good Partner
Oh, the question of all questions. It’s like asking, How do I find a wife? In other words, sometimes you get lucky and one falls in your lap, and sometimes you keep striking out. You do your best to vet out candidates before committing. What you can do is agree to work on a deal together and see how it goes before partnering up full time.
Here are a few great ways to find potential partners:
Go to REIAs and network. Simply go where the investors go and start talking and getting to know everyone. Sooner or later, you’ll find a few candidates.
Look for people who continually show up and participate. The best way to find the serious investors is if they keep showing up to the meetings. This is sort of a long range test because I like to see if they are showing up 6 months or more. Typically people stop after 3 months if they are not committed to REI.
Join BiggerPockets. As a member of BP, you can set up keyword alerts. I set one up to be notified when anyone types in New Jersey. I then pay attention to who posts in those threads over time. Then contact them and start building a relationship.
It all comes down to talking with people and putting yourself out there.
Should You Have a Written Agreement?
ABSOLUTELY YES! There is no excuse or reason to not have a simple agreement written down. You can just have a Google document or even a plain old email. The written contract will provide a reference to clear up any disagreements or if you forget something.
I like to keep it as simple as I can make it while still having it hold value. The contract should have the following parts:
Who does what. This could get extremely detailed if you aren’t careful. I like to try and describe each partner’s duties in a few sentences:
Scott will do all the marketing for seller leads and buyer leads. He will fund all marketing and any title work that is needed. He will also do property research that is needed.
John will take phone calls, negotiate with sellers and make offers. He will also meet sellers and buyers at properties and do a general repair estimate on the property.
If there are tasks that were not included in the agreement that you discover later, handle them ASAP. You should discuss them and add assign those duties to the person in the contract.
Your split. At first my partner and I tried to break up the split depending on which tasks we performed. Curate the lead: 30%. Talk with and negotiate with the seller: 40%. Find a buyer: 30%. Ours was broken down way way too much. After the first deal, we quickly realized this was a huge pain. So we quickly switched to a straight 50/50 split.
I recommend doing a straight percentage split. It doesn’t have to be 50/50, but it shouldn’t be too far off. You don’t want one person getting jealous on payday. Trust me, even if you are not money hungry, it hurts to see your partner get twice as much as you do on every deal.
Length of partnership. My partner and I have an agreement that says we partner on a deal by deal basis. This allows us a greater flexibility. We had an understanding that if one of use wanted to work an entire deal ourselves, then it was ours. There is some gray area with this type of agreement, so I don’t recommend it for everyone.
I would recommend going on a yearly partnership. You then revisit your partnership every year and agree to continue, modify or end it. Just put this in writing so there is no disagreement over when the partnership dissolves.
Not everyone is going to be able to work well with a partner. Many times it’s great to have one when you are starting out, but once you both are experienced, it might be best to break off on your own. At a certain point goals will shift and so will strategies.
Finally, never lie to or take advantage of your partner. Doing so is a quick way to ruin your reputation, and that is really all you have in this industry.
Keep struggling all the way to your success!
How did you find your partner? What roadblocks have you run into during your partnership, and how have you fixed the issues?
Leave a comment, and let’s talk!