Should You Partner on Your First Real Estate Deal?

by | BiggerPockets.com

Should you partner on your first real estate deal?

In short, I don’t think you should! Why?

I think you should never partner on your first real estate deal because you don’t want to have two cooks in the same kitchen. In my opinion, I think it’s going to be very hard to find the right partner where the synergies align and you don’t get into any arguments. So, I recommend that you do it on your own.

Related: 5 Questions to Ask When Considering an Investment Partner

Why I Don’t Think You Should Partner on Your First Deal

You should be the master of your fate and captain of your soul. So if you do well and make a profit, you’re going to reap the entire reward of that profit. And if you don’t do well and you lose money, you only have yourself to blame. You’re not going to get into any arguments with a so-called “partner.”

I’ve been down this path many times before—not just from a transaction standpoint but from a business standpoint. It’s something that I’m never going to do again.

Unfortunately, it often ends up as a disaster. There’s a sour taste in everyone’s mouth, and you just part ways. You might end up with an awful, emotionally drained, gut-wrenching feeling.

You don’t want that in your life! And you want to focus on as much positivity as possible. Real estate is a rocky road, so feed yourself with as much positivity as you can.

Now, the only way that I see a partnership working in business or on a specific transaction is if your partner is going to be completely passive.

Let me give you an example. Say, I found a deal and I know what I’m doing. I’m going to buy, renovate, and sell. I decide to partner with someone who is just going to give me the money, stay out of it, and be completely passive.

I’m going to do what I need to do. I call the shots; I pull the strings. The partner has no say but is going to get a fee or percentage—whatever you negotiate with that specific partner.

The same can go for business, right? If you’re starting a business, you don’t have your own capital, but you have the ability and knowledge. You’ve had previous businesses that were successful.

Sure, you can go to a potential equity partner where they come to the table with a certain amount of capital, but then they need to get out of the way. They have no say, and you control the reigns.

Keep this in mind. If you do lose, pay your partner back. You have to do that no matter what. Warren Buffet says it takes a lifetime to build your reputation and five minutes to lose one.

I’ve lost so much money in my lifetime. I stopped counting at a million—that’s no joke. Anytime I lost money and it wasn’t my own, I paid it back. That’s why my reputation is pristine to this day.

Watch my video above where I go into further detail about partnerships in real estate.

How do you feel about active partnerships? Do you have any success stories to share? Any failures?

Please comment below.

About Author

Engelo Rumora

Engelo Rumora, a.k.a.”the Real Estate Dingo,” quit school at the age of 14 and played professional soccer at the age of 18. From there, he began to invest in real estate. He now owns real estate all over the world and has bought, renovated, and sold over 500 properties. He runs runs Ohio Cashflow, a turnkey real estate investment company in the country (Inc 5000 2017 & 2018) and is currently in the process of launching a real estate brokerage called List’n Sell Realty. He is also known for giving houses away to people in need and his crazy videos on YouTube. His mission in life is to be remembered as someone that gave it his all and gave it all away.

4 Comments

  1. Jerry Maze

    I’m glad I read your article… I have considered doing just that… but, for the very reasons you mentioned I’ve hesitated. My thinking is even though it may take a little longer to pull one off… having only myself to answer to one way or the other is better for me.

    I also agree with the way you handle taking care of those that help you, regardless of how you do yourself on a deal they helped you with. Relationships are huge and so is one’s reputation!

  2. Julie Tonioni

    Engelo,

    Thank you for this post.

    I have just been through this scenario. I partnered with my very close friend for a flip and supplied 90% of the rehab capital. This was my second flip and she had done several of her own over the last couple of years so I felt confident going into the deal we would both do well in our agreed upon roles.

    I am fairly easy going however what I learned is when my reputation, money, and business are involved I am not passive and my expectations and energy are very high. Because our management styles did not align, after a couple of weeks we began arguing. I eventually took over the project.

    Unfortunately because of the arguing I don’t know if the friendship is recoverable. The amount of negativity I felt really began affecting my thoughts and life. As you said “Feeling awful, and emotionally drained” was brutal. I had to keep reminding myself minute to minute some days that I didn’t need this type of energy in my life. I ended up cutting off communication. Hah… how does one flip a house without communication? It’s difficult and things do not operate smoothly.

    The house is finally set to close in 12 days and I have mostly cut off contact until the deal is over. No amount of money made was worth losing the friendship. People say time heals and hopefully that will be the case.

    I am not against partnering in the future however I would definitely follow your example of maintaining 100% control for a percentage in return to the investor. If profitable this would make two happy people !

    • Engelo Rumora

      Thanks for your comment and honesty Julie.

      Another thing that I forgot to mention in my blog is to NEVER do business with family or friends 🙁

      We take things for granted and get lazy when working with someone that is very close to us.

      Conducting business has to be done in a strict manner with set boundaries.

      That rarely happens when working with family.

      I suggest being the better person, apologizing to your friend, giving her a larger spread of the profit and not doing any business together.

      Just stay friends.

      In my opinion, you seem like someone that should do it all themselves.

      I wish you much success.

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