How does finding a partner help out with first deals?

4 Replies

I’ve heard from many people that finding someone to partner with when first starting out can be a good idea. What makes it a good idea? Is it combining money for down payments? Also, would it ever make sense for a successful real estate investor to partner with someone who is just beginning this career? I’m so new to all of this that I have a gazillion questions! Bear with me. I promise to search the forums for answers as much as possible :-)

@Colleen Prescott I am going to attempt to answer in order minus your first question.

Is it a good idea because of combining money for down payments? This could be the case. If you are short on funds this is one of the many reasons to find a partner. But that means you would need to bring something else to the table. Like construction knowledge, market knowledge, etc.

Would it ever make sense for a successful real estate investor to partner with someone who is just beginning this career? Short answer is no. If the new person is willing to do 80% of the work, provide the financing, and take care of the day to day, then yes. This happens a lot more than you think. It is how most non-guru investors will help newbies out. They are there to answer any questions and walk you through the process and in return they get a cut of the deal (anywhere from 20% to 50%). I think this is the best way to get a mentor. You aren't out $$$ up front and you have them really wanting you to succeed because they get paid if you do.

Back to your first question about it being a good idea to partner, well it depends on who you are partnering with. If you find a veteran investor in the area you want to get involved with and will take a small cut of the profit to walk you through it, then it could be very beneficial. If you find someone with talents and resources different than yours but is also just starting out, it can still be very lucrative for both new investors as long as lines are clearly drawn and responsibilities are divided. If either of these are not the case, then I would not get involved in the partnership.

Hope this helps you out on your venture into investing!

Using a partner could be for many reasons. Are you going to buy ad hold? Fix and Flip? Are you able to make the whole down payment? Is you DTI to high already? Are you inexperienced? Partners can give you the things you need to set up successfully.

You do not have to have a partner to be successful. 

It is a way to gain knowledge or leverage only. If you are new to REI or you are unsure of yourself then find a partner.
Here is my only warning to you as a new investor looking for a partner.  CHECK THEIR CREDENTIALS  !!!!!  If you are the one with the money and they are just experienced then you make sure they really have knowledge you need.  And if the credentials are great then make sure you are getting a fair deal from them. DO not go into a deal that is one sided for them.  Make sure you know if they are using you.   

I have heard of new investors finding the deal, putting down the money, and only getting 50% of the property.  If this is the case you are being used. 

Any other questions please tag me.