4 Tell-Tale Signs of a Bad Partnership (From Personal Experience)

4 Tell-Tale Signs of a Bad Partnership (From Personal Experience)

2 min read
Sterling White

Sterling White is a multifamily investor, specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling was involved with the management of over $10MM in capital, which is deployed across a $18.9MM real estate portfolio made up of multifamily apartments. Through the company he founded, Sonder Investment Group, he owns just under 400 units.

Experience
Sterling is a seasoned real estate investor, philanthropist, speaker, host, mentor, and former world record attemptee, who was born and raised in Indianapolis. He is the author of the renowned book From Zero to 400 Units and the host of a phenomenal podcast, which hit the No. 1 spot on The Real Estate Experience Podcast‘s list of best shows in the investing category.

Living and breathing real estate since 2009, Sterling currently owns multiple businesses related to real estate, including Sterling White Enterprises, Sonder Investment Group, and other investment partnerships. Throughout the span of a decade, he has contributed to helping others become successful in the real estate industry. In addition, he has been directly involved with both buying and selling over 100 single family homes.

Sterling’s primary specialities include sales, marketing, crowdfunding, buy and hold investing, investment properties, and many more.

He was featured on the BiggerPockets Podcast episode #308 and has been contributing content to BiggerPockets since 2014, with over 200 posts on topics ranging from single family investing and apartment investing to mindset and scaling a business online. He has been featured on multiple other podcasts, too.

When he isn’t immersed in the real world, Sterling likes reading motivational books, including Maverick Mindset by Doug Hall, As a Man Thinketh by James Allen, and Sell or Be Sold by Grant Cardone.

As a thrill-seeker with an evident fear of heights, he somehow managed to jump off of a 65-foot cliff into deep water without flinching. (Okay, maybe a little bit…) Sterling is also an avid kale-eating traveller, but nothing is more important to him than family. His unusual habit is bird-watching, which he discovered he truly enjoyed during an Ornithology class from his college days.

Education
Sterling attended the University of Indianapolis.

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Real estate, business, and investment partnerships can be powerful. They can also be disastrous.

Partnering up in one way or another ultimately becomes a necessity for most investors and businesses. This is regardless of size of capital, skills, and IQ. Buffett and Charlie Munger — and even Steve Jobs and Steve Wozniak — are classic examples of partnerships. It can be very beneficial for both protecting what you’ve got and getting to the next level. However, bad partnerships can get very costly and messy quickly. Speaking from experience, a bad partnership can be mentally draining. I recently exited a partnership that had all the signs of a toxic relationship. What signs should you be watching out for?

1. Different Investment Strategies & Goals

If you and your partner do not share the same goals and strategies, you are going to get frustrated and butt heads consistently. For example, one partner may want to buy and hold for the long-term, while the other wants to fix and flip. This will impact all areas of your business. It means looking differently at what types of deals you want, how you maintain properties, how you build your organization and operation, and who you engage with as clients and vendors.

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Related: 4 Lessons I’ve Learned From My Made-in-Heaven Real Estate Partnership

2. Too Many Overlapping Skills

It has always been my opinion that if you have a partnership where your skills constantly overlap, it will lead to quite a few extra challenges. You’ll have significant gaps in your overall business. You’ll need to hire out and pay for others to fill those roles. That can put a strain on a startup. You will also be trying to do the same tasks and have very different opinions on how they should be executed.

In contrast, my current partner has quite a different skill set than I do. There are areas where we may overlap, but we specialize in different parts of the business. While he excels in business operations, running the numbers, and legal, I focus on marketing, business development, and branding, amongst other things. It just works better — and is more profitable.

3. Opposite World Views

If you have two totally different world views that can cause issues, too. It shows up in how you treat people, customers, and vendors. It makes a difference in daily business decisions, such as your approach to rehabbing and maintaining properties. You might not agree on everything, but you’ve got to be able to get along and work in synergy.

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4. Un-Aligned Interests

Your interests should be more aligned than just wanting to make money in general. Who doesn’t want that? Billionaire real estate investor Sam Zell says the definition of a true partnership means equally sharing risk. It should also mean being equally motivated to make progress. Now, you may both bring different things to the table. One of you may bring cash, the other time and knowledge. One may be the technical expert, the other may have connections and marketing experience. You both really need to be invested in making it work, at the same scale.

Related: 5 Reasons for Engaging in Real Estate Partnerships (Other Than Money!)

For example, in my previous partnership, I wanted to scale and purchase more properties, while that partner was fine with the properties we already had. The ambition levels were completely different. It felt stagnant to me — I wanted to grow. It’s no good when one partner is complacent and the other is trying to grow and do more.

If you are considering a partnership, know what to look for, know the warning signs — and if you’ve made a bad choice, correct it fast.

What are some of the issues you’ve had with partners? What signs do you think indicate that you’re entering into a good partnership?

Let me know your thoughts with a comment!

Partnerships are like marriages -- good ones will elevate you to your best potential, while not-so-great ones will drag you down. Watch out for these signs!