Finding a Real Estate Partner for Your Investments

Have you ever thought about a real estate partnership? Reducing risk by 50%? Making twice as many deals? A commitment to real estate partnerships is not something to be taken lightly, but rather as an integral part of successful real estate business. And finding the right partner may be the best decision you have ever made in your real estate career. However, it is equally likely that a poorly structured real estate partnership could hinder growth. With this in mind, it is in your best interest to exercise due diligence and take your time to screen potential candidates, do your homework and take your time without being sure of your decision.

There are several ways to find your potential real estate partner: 1. Investment clubs, 2. Networks, 3. Social media, 4. Real estate agents, 5. Friends and family. However, if that's not enough to get things off the ground, there are a few more things you should do to ensure that structuring your real estate partnership works in your favor.

1.Partnerships are based on a balance that allows both parties to share and overcome responsibilities and workloads.

2.The structure of the real estate partnership gives both parties greater flexibility in the distribution of profits and losses.

3.The right partner can bring extra resources to the table, including capital or an extensive network.

4.Pooled portfolios from real estate partners can help draw attention to meetings with potential lenders.

5.Partners can offer a different perspective when analyzing potential deals and investments.

A good partner can offer something that you may not have at the moment, like access to capital or market experience in your chosen investment area. Consider the following issues that you may have also with real estate investment partners:

1.One partner may offer more, creating inequalities in equity or skills.

2.Partnerships can create unnecessary stress on healthy friendships.

3.They can have very different management styles, leading to organizational conflict.

4.Profits must be split, which reduces overall profits.

5.If the partnership agreement is not entirely clear, there may be problems with the delegation of responsibility or losses.

Here are personality traits to look out for in a potential real estate investor:

1.Trust.

Make sure you are able to develop a relationship of trust with your partner and if for some reason you find it difficult to gain this trust, it will be difficult for you to continue working with your partner, as you want to run the partnership as smoothly as possible. A business partnership is like a marriage, where you will share money and financial accounts, debt, responsibilities. Ask probing questions, ask for documentation of past transactions, also consider getting each other's credit reports and criminal records. Get to know them well enough to trust them unconditionally (or realize that they are only 99% trustworthy, not 100% trustworthy, and leave).

2.Goals.

If you are looking for stable income for retirement, then you do not have a business partnership with someone looking to invest in high-risk, high-return rental properties. Talk openly and frankly with your potential partners about your experience, liquidity, risk tolerance, and goals. 

3.Strengths.

Make sure you understand your business partner's strengths and weaknesses, so you don't create an obvious hole in your experience and performance when running a business. If you find out later that none of you have a relationship in a key area that is necessary to execute the business, you may find yourself in big trouble.

4.Capitalization.

Setbacks and unforeseen expenses are the rules, not the exception when investing in real estate, so make sure to budget them, and then make sure you and your partner have plenty of extra money, even if you go over budget. Also, before you enter into a partnership with real estate, you must agree on the percentage of profit that each of you makes. For example, you can negotiate a 50/50 profit sharing or you can negotiate 70/30, depending on what you both invested in.

5.Chemistry.

You will uncover that some people are too negative, too angry, too annoying, too sloppy, or just too bad to get along with. Pay attention to the way you feel about them, as you will be spending a lot of time with this person, going through difficult moments, having delicate conversations about money and socio-political issues and you don't want to be arguing with this person all the time.

6.Expertise.

If you are working with a beginner, make sure you are an expert with a lot of trades under your belt, and also, make sure they bring something else to the table. If you are a beginner yourself, make sure to become an experienced partner and study the details of at least half a dozen deals made by other investors.

How investors structure a real estate partnership can directly lead to success or failure. Therefore, no business partner should take this part of the process lightly.

1.Make the process simple.

2.Create the terms of the agreement.

3.Assess your strengths and weaknesses.

4.Assess the potential of the partnership.

5.Establish clearly defined roles and expectations.

6.Analyze business goals together.

7.Determine if a partnership is right for you.

8.Protect yourself from potential problems.

9.Find someone who compliments your skills.

Some people will obviously be difficult to deal with every day and others may signal that their greed is in the way of your pockets. Trust your intuition and avoid everyone except those with whom you truly feel synergy. This is not just running a business, this is a personal relationship that is more valuable than money.