Finding a partner in real estate is tricky, tricky business, and not to be taken lightly. If you have read any of my previous posts, you understand the danger in choosing and relying on a partner for your investment properties. So for the most part, my recommendation is not to partner with anyone in real estate. Now there are special circumstances that would merit taking out a partner, and even I have considered it once again in the recent past. However, I want to make one key point to you here: when you are first starting off, do not, I repeat, do not take out a full partner in your business. Test the water on a single deal, and partner with them on that one deal only, don’t make them a full partner in your business. What will end up happening is that you will be doing all of the work, and making only half (or whatever your arrangement is) of the money. But if you want to do a test drive with a partner on a real estate deal, here are some good guidelines to follow when choosing them:
Find Someone that Shares Your Core Set of Values
I am a Christian, and proud to be called a child of God. So if I were looking for a partner, picking someone who is an atheist would just be insanity. Any deals with contractors, tenants, real estate professionals, etc. would just end up being a problem. So when you are looking for a partner, question them about there religious, moral and ethical beliefs, and make sure they line up with your own. A good partnership relies on two people that can agree on the major items of life and business.
Find Someone that has a Different Personality than You
The best thing I can say here is this: a business partnership is like a marriage, without the physical component. And the best marriages out there consist of two completely different people. Now, you will have common ground with your real estate partner because he / she wants to work in real estate, as you do, but most everything else should be opposite. If you are just starting out, you probably don’t have a lot of loose cash, therefore you are looking for someone that has cash ready to invest. If you are good at dealing with people, perhaps look for someone who is really good at research and paperwork. Bottom line, you are looking for someone that is strong in areas that you are weak, and weak in areas that you are strong.
Make Sure Your Partner’s Goals are Aligned with Your Own
This is extremely important. Probably the best example would be the exit strategy for a property. If you are looking to flip the property and your partner wants to hold it for long term rental income, then you have a definite problem. But this principle applies to every aspect of the deal. You need to come to an agreement on how to finance the property, what the top end buy price should be, how you are going to handle the closing, and post closing repairs, how you are going to market the property, and your exit strategy. All are important points to fostering a winning real estate partnership.
Put the Partnership on Paper
As important as having aligned goals, putting the partnership in writing is key. I don’t care how close you think you are to the other person, you need to have it in writing. You should have a written set of goals for the property, and offices that you both will employ. Figure who is going to be responsible for what in the deal. Taking care of these things up front with prevent a lot of problems through the deal. Trust me, I didn’t do this when I started out with a partner, and it contributed to the disaster that was my first real estate investment.
So there it is, although not recommended, a real estate partnership can be profitable, as well as enjoyable, It just means that you have an extra layer of work to do before you can even get started investing. But if your cash is low and you have a deal in hand, it might be the only way to facilitate the deal.