{"id":86220,"date":"2020-02-07T12:00:40","date_gmt":"2020-02-07T19:00:40","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=86220"},"modified":"2021-03-16T12:20:35","modified_gmt":"2021-03-16T18:20:35","slug":"good-partnership-makeup","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/good-partnership-makeup","title":{"rendered":"5 Qualities to Seek Out in Your Next Real Estate Partnership"},"content":{"rendered":"

A business partnership is often compared to marriage, and I get why. How well you know and trust your partner can not only determine the success of your partnership, but also your ability to make decisions together and overcome challenges.<\/p>\n

While most of us wouldn\u2019t blindly enter into a lifelong commitment with someone we don\u2019t know, it\u2019s less common that business partnerships or joint ventures are approached with the same level of seriousness.<\/p>\n

Rather, investors and entrepreneurs could be making the decision to partner up out of fear of personal risk, with the goal of spreading out that risk or sharing resources. Or maybe they just haven\u2019t thought it through. Haven\u2019t we all heard the horror stories about a friendship that goes awry and a\u00a0partnership that dissolves after all the work of setting it up, acquiring properties, and starting to work through those deals?<\/p>\n

Over the years, I\u2019ve had challenging partnerships, and I\u2019ve had truly successful ones. I\u2019ve learned a lot from both.<\/p>\n

Of course, when a deal or endeavor goes south, it brings to light any issues in a partnership that may have gone unnoticed during the good times.<\/p>\n

So, what are the warning signs?<\/p>\n

What should you be looking at before<\/em> entering into a partnership?<\/p>\n

5 Qualities to Seek Out in Your Next Real Estate Partnership<\/h2>\n

1. Align your goals.<\/h3>\n

Goal alignment is critical for a successful partnership. What are your long-term goals, and are you in sync with your partner?<\/p>\n

Do you have the same amount of time and\/or money to invest to reach those goals?<\/p>\n

Perhaps you want cash flow to supplement your income. Or maybe you\u2019re focusing on building net worth.<\/p>\n

When I first started out in real estate, I wanted to accumulate buy and hold properties for passive cash flow and then pay them off by retirement. Of course, investing goals can change or evolve over the years, and they\u2019re not the same for everyone. Is your partner on the same page?<\/p>\n

2.\u00a0Know your preferred exit strategies.<\/h3>\n

It\u2019s often said that we should have an exit strategy in mind before even entering a deal or starting a new endeavor. Do you and your potential partner have the same exit strategy in mind? What about a plan B?<\/p>\n

I was once in a deal where my partner and I both intended to fix up the property and then sell it. After doing the work, the market changed, and we weren\u2019t able to sell it at the price we wanted to.<\/p>\n

Since my money for the deal was borrowed and I was paying on it monthly, I wanted to rent out the property<\/a> for some much-needed cash flow until the market came back. My partner preferred to let it sit until we were able to sell. At that point, since we had different opinions on how to exit the deal, I ended up having to buy him out.<\/p>\n

\"free-mentor\"<\/p>\n

Related:<\/strong> 4 Tell-Tale Signs of a Bad Partnership (From Personal Experience)<\/a><\/em><\/p>\n

3. \u00a0Seek out complementary skill sets.<\/h3>\n

Rather than having the same skills, it may be better if your skill sets complement one\u00a0another’s.<\/p>\n

Also, when it comes to real estate partnerships, being handy doesn\u2019t hurt either. For example, years ago I bought a property with a relative who\u00a0was an electrician, while\u00a0I was a painting contractor. So, if needed, we could jump in and do the work at cost.<\/p>\n

4. Define roles and responsibilities.<\/h3>\n

While many folks start out doing the work themselves to save money, each partner\u2019s role and his\/her responsibilities need to be clearly defined. Who\u2019s doing what? And how will both parties be compensated moving forward?<\/p>\n

Maybe maintenance or management will be done by a partner or maybe it\u2019s best to outsource that. Another thing to consider is what will happen if a partner can no longer participate in his\/her role or perform it effectively.<\/p>\n

I\u2019ve been in deals where the roles and compensation weren\u2019t figured out ahead of time or there was no schedule for the work to be completed, and it did put a strain on the partnership. After all, both parties expect it to be a fair exchange.<\/p>\n

5. Prepare for change.<\/h3>\n

This is one of life\u2019s certainties: things change. So, it\u2019s best to have certain protections in place. For example, what do you do with the properties if something were to happen to one of the partners? Do you have a buy\/sell agreement?<\/p>\n

Of course, there are other things to consider, as well, like entity selection, tax considerations, and how much liability or risk you\u2019re willing to take on.<\/p>\n

If everything checks out and you\u2019ve joined a solid partnership, it can have a huge impact on your deals or your overall business.<\/p>\n

4 Ways an Ideal Partnership Can Help You<\/h2>\n

Done right, partnerships can give you an edge, enabling you to do things that would otherwise be a much bigger challenge.<\/p>\n

What becomes easier in a good partnership?<\/p>\n

1. You can share the workload.<\/h3>\n

If you\u2019re going at it alone, without a partner and without outsourcing, you are wearing all the hats, so to speak. Everything revolves around you.<\/p>\n

When I owned my own painting company and most of my business revolved around me, I had a really hard time getting away or taking any kind of break. Now, in my note company, if my partners or I want to go on vacation, we can do so, and we can cover for each other.<\/p>\n

2. You can focus on your strengths.<\/h3>\n

Not only can you take a break when needed, but you can also shift your focus to what you\u2019re best at, and your partners can do the same.<\/p>\n

One of my biggest strengths is raising capital, but my partners\u2019 strengths are different, so they focus on things like acquisitions, research, and borrower management.<\/p>\n

\"outsource-income\"<\/p>\n

Related:<\/strong> 4 Lessons I\u2019ve Learned From My Made-in-Heaven Real Estate Partnership<\/a><\/em><\/p>\n

3. You can gain a fresh perspective.<\/h3>\n

Another big benefit of having partners is being able to bounce your ideas off them. Otherwise, it\u2019s like you\u2019re on an island, making all of your decisions on your own.<\/p>\n

Having someone else with a fresh perspective can get you back on track or it could validate what you\u2019re doing. It\u2019s usually easier to solve a problem with a team of minds instead of just one.<\/p>\n

4. You can scale up.<\/h3>\n

When you\u2019re a small outfit or just one person, you can only do as much as you personally can handle. Scaling up into a full-blown business could be done more quickly with partners than without.<\/p>\n

Personally, I think the best thing about having my partners is that we can build a bigger enterprise with a higher likelihood of continued success\u2014and one that also makes a larger impact.<\/p>\n

\"\"<\/a><\/p>\n

So, have you considered a real estate partnership? If so, what planning did you do, or will you do, to make sure it\u2019s successful?<\/em><\/p>\n

Let’s talk below!<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

There are so many great things about having business partners\u2014from sharing the workload, to workshopping ideas, to scaling faster, and more. But you wouldn’t marry someone without thoroughly understanding what you’re getting into, so why not vet a business partner the same way?<\/p>\n","protected":false},"author":807,"featured_media":120447,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4241],"tags":[],"class_list":["post-86220","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-business-management"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/86220","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/807"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=86220"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/86220\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/120447"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=86220"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=86220"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=86220"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}