Your Guide to Deciding on a Real Estate Investment Partnership

This post may contain affiliate links. For more details, please view our full disclosure.

This post brought to you and contributed by an outside writer.

Real estate investments tend to have more security than stocks and bonds, as property doesn’t usually have a roller coaster of ups and downs like the stock market and economy.

The housing crisis of 2008 is a pretty big exception to this rule, though the problem originated with the lenders and not with property owners and their companies.

If you have the resources, you have the potential to turn a handsome profit with the right real estate move. However, if you don’t have the resources, you need to think carefully about looking for a real estate investment partnership.

The Benefit of a Partner

Steven Taylor Taylor Equities is a good example of someone who has amassed capital over the years in real estate. Partnering with someone like Taylor could bring cash to the negotiating table. The other party’s investment splits the risk that accompanies a purchase, and if they are already established in the real estate industry, they bring experience to the deal.

If neither of you has the money, you really aren’t going to go far. Lots of money and no experience will turn into more costly ventures that don’t always have the best return. Seek out a partner that will complement the areas where you are weak.

Explore Common Objectives

Real estate investments aren’t a ticket to overnight riches, nor will a basic portfolio be enough to pad your retirement account. When working with a partner, you both need to be on the same page. You don’t want one of you will to play it safe while the other takes a gamble on a high-risk venture.

High-risk situations often lead to bankruptcy for even the best of investors, so stick to the most realistic goals that provide a positive cash flow within the first year of purchase. Decide how long you will be holding on to a property since that influences how long the partnership will probably need to last.

Have the Escape Plan

While two people investing in a property can make things on the front end seem more complicated, the end of the plan becomes infinitely harder to hash out.

What if the partnership isn’t working for either you anymore?

What if someone needs the equity from the property?

You need to have the escape routes clearly defined and in a partnership contract before you move forward. There are really only three good options for when one half of the partnership wants to get out of the deal. You could:

  • Sell the property.
  • Buy the other partner out.
  • Or you could find another partner to buy out the other.

There is a fourth option of giving your partner a loan against their share of the property, but it will be less risky to simply buy them out. Include terms of valuation for the property in your agreement, as this determines the cost of a buyout or a new partner buy-in.

Develop an Equitable Arrangement

Partnerships require a lot of give and take, and successful ones will be fair and balanced in the approach to property investment and management. Don’t land on a potential partner just for the money you think they will be able to put in toward a property.

Anyone who is buying into your idea will want to have some authority over what happens. This is especially true if the partner is investing more money than you into the venture. You need to demonstrate and promote equality in the relationship, by making decisions after consulting with your partner and spending their money even more carefully than you would spend your own. Keep transactions transparent, but strive to under-promise and then over-deliver results.

A partnership could be what you need to get started in real estate investing. It’s a serious, long-term commitment and shouldn’t be done without a signed contract and comprehensive discussion of the working relationship.

Share this post!

Leave a Reply

Your email address will not be published. Required fields are marked *