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Updated almost 5 years ago on . Most recent reply

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How to Partner on A Deal

Jamila Thompson
Posted

Hi everyone,

I am a 23-year-old engineer in the NYC area. I have yet to do my first deal. 

I am interested in investing in NJ and CT multifamilies. Is partnering on a deal a good start to getting acquainted with the mutifamily investing process or do you suggest buying a multifamily on your own first? I have been out of college for a year and none of my friends are really interested in real estate. I would love to partner on a deal in the near future, but where do I find trustworthy partners? What makes a good partnership deal? In specific terms, how do I know a potential partnership is beneficial for me? I would love it if you can recommend resources. 

Thank you 

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Filipe Pereira
  • Property Manager
  • Windsor Locks, CT
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Filipe Pereira
  • Property Manager
  • Windsor Locks, CT
Replied
Originally posted by @Jamila Thompson:

Hi everyone,

I am a 23-year-old engineer in the NYC area. I have yet to do my first deal. 

I am interested in investing in NJ and CT multifamilies. Is partnering on a deal a good start to getting acquainted with the mutifamily investing process or do you suggest buying a multifamily on your own first? I have been out of college for a year and none of my friends are really interested in real estate. I would love to partner on a deal in the near future, but where do I find trustworthy partners? What makes a good partnership deal? In specific terms, how do I know a potential partnership is beneficial for me? I would love it if you can recommend resources. 

Thank you 

Dave Ramsey always says "the only ship that doesn't sail is a partnership" and I tend to agree with him. I was also involved in a partnership (that thankfully just got dissolved last month) and it didn't end well for either of us.

There are 4 things (amongst many others) that you should consider when entering into a partnership. Ask yourself what happens in the following 4 scenarios, and add them to your operating agreement.

1. Death - What happens if one of you die?

2. Divorce - What happens if one of you get a divorce? Does the partner's ex wife/husband get 1/4 of the business?

3. Disinterest - What if one of you lose interest? Is there a buy out? Do they just release their portion?

4. Drugs - What happens if one of you become a druggie? Who becomes the decision maker? Does the druggie forfeit their ownership and decision making rights?

Partnerships are great if each partner has something that the other partner doesn't have and is willing to provide it in exchange for what the other partner has. Think of it as a bartering system. The problem with most of them is that valuing whatever each partner has is difficult, and that's what causes riffs. For example, if I am an equity partner (money) and you are a bringing the time needed to manage the deal, how much time is my equity worth? And what happens after you've expended all of the time, yet we need you to do more? 

Long story short, be very careful with partnerships.

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