Like any good road trip or adventure, investing in real estate is a lot better when you’ve got someone else along for the ride.
When most people first hear about the benefits of real estate investing, they normally learn of great solo success stories and moguls. Donald Trump, Warren Buffett, Sam Zell and Herb Simon might be just some of these names. These professionals wouldn’t be where they are without the use of successful partnerships. Most real estate “gurus” and authors make a big deal out of their individual rags to riches stories. Yet no matter how much of an introvert you are, investing in real estate is far more fun, risk adverse, exciting, and rewarding when you are engaging with others.
Some of the immediate benefits of partnering up or collaborating that come to my mind include:
- Reduced risk
- Ease of investing
- Increased enjoyment
- Maximized time
- Use of other people’s expertise/knowledge
- Leverage without having to qualify for a bank loan
“If you want to go fast, go alone; if you want to go far, go together.” — African proverb
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You Don’t Get Big Unless You Partner Up
The truth is that those big names I mentioned wouldn’t have gotten big or stayed in the spotlight if it weren’t for a lot of others on the way. Donald Trump is worldwide because he sticks his brand name on other people’s buildings. Buffett has always used stocks and buying businesses as a way to partner up. More recently, Berkshire Hathaway has teamed up with venture capital partners to take down even bigger deals. It’s something he says they plan to do more of going forward.
For billionaire real estate investor Sam Zell, partnering up is about investing safely and on a larger scale. He says, “The definition of a true partner is someone that shares your risk.”
It’s Easier to Get Started With a Partner
Despite all the big claims, launching yourself into real estate by yourself is very challenging. Trying to be a “solopreneur” and doing everything yourself is simply not easy.
It might be more enjoyable than flipping burgers in a greasy kitchen for 12 hours a day. It may be more exciting than working a packing production line. It may pay way more than a doctor makes. But to say it is easy is a lie. There is a lot to it.
If you are new to the industry and have the money to purchase a deal to flip but not the expertise to budget and execute a rehab, then partnering with someone will be beneficial for you. You can try and do it on your own, but it will take significantly longer, it will be riskier, and you could lose all your invested capital. If you find someone else to work with on those first couple deals, you can learn from their processes. The same goes the other way once you’ve mastered a certain part of investing. You can then help others and share the proceeds, while reducing risk and elevating your ROI.
Just choose your partners carefully. Look for partnerships where it’s a win-win for both parties.
Partnering up in real estate is not a sign of weakness nor does it need to dig into your profits. In fact, in John Maxwell’s revised and updated book The 21 Irrefutable Laws of Leadership, he shows how it is wiser to focus on your strengths and recruit others in their areas of strength. That’s how the best get to the top and stay there. It doesn’t matter whether you are driving and navigating and the other person is paying for the gas — or vice-versa. Partnerships have many benefits and have a place in our investing at every level of the game.
Investors: Do you use partnerships to help build up your (and others’) businesses?
Let me know with a comment!