Working with a partner on a real estate deal can be a great way to grow your business. There are many investors who are on the fence as to which way they want their business to go and can’t quite find the break they need. A partner can fill in the gaps you may have. Moreover, the right partner will allow you to close deals you may have not otherwise had the means to. In the pessimistic world that we live in, finding a partner that we trust can be a very difficult task. If you rely on your network and the people closest to you, finding the right partner may be a lot easier than you think.
The best partnerships will fill in the gaps you may have in your business. If you have capital that you are looking to invest, but don’t know where to start, you can find someone established in the business and reach out to them. Conversely, if you have knowledge of the business and are looking for financial backing, you should look for someone that has money while you find the deals. There are many different types of partnerships and agreements, but the premise of any partnership should start with finding someone with a different skill set or different assets than you.
Aside from finding a partner that brings something different to the table, you need to make sure you are both on the same page before you start. Having a partner with money when you don’t is great, but without an end goal it will cause bigger problems down the road. You need to spend time and iron out how you want to do business, what your goals are, what the expectations will be and how any profits will be divided. These conversations may be slightly uncomfortable, but they are essential in forming a good partnership. It is often too late to do anything once you are involved in the deal. If you don’t know whether or not you want to sell or for what price before you start it will end up creating problems down the road. Put everything on the table when you are figuring out whether or not you can work together.
Most new partnerships are formed with people you have an existing relationship with. Without getting over dramatic, you need to be able to separate business and friendship. Life is too short to fight about petty things that keep people apart for many years. If you are working with friends or family, you need to talk about money. This is the most common thing that partners fight over. Some feel they are doing too much work for too little money and others feel that they are leaving money on the table in certain deals. Leave nothing to chance when you are working with people close to you and always leave the door open to change things from deal to deal. What makes sense on one deal may not apply on another. If you are truly close to the people you partner with, you should have an open line of communication and discuss something as soon as they bother you. There is plenty of money to be made with a successful partnership, but it is not worth losing someone close to you over.
Even partnerships that would seemingly never break up run into problems. This is why it is important to always create legal partnership entities when you get started. In addition to allocating assets you need these agreements come tax time. Again, this is another discussion that needs to be had before you get started. You may click with a fellow investor at a meeting and quickly find a deal you are interested in, but you need to take a step back and get all of the legal hurdles out of the way before you start. Have an attorney draft the partnership agreement and make sure you are comfortable with it before you sign anything.
A partnership can work on a deal to deal basis or be a long term commitment. This should also be discussed before you get too far. You may find a deal that you want to work on your own or with another partner, but if you don’t have an agreement in place your new partner may have issue with it. On the flip side, you may find that your new partner is working on a deal that they didn’t run by you and you can feel slighted. Whatever your agreement is, you need to discuss which deals you will work on individually and which may be separate. If you or your partner starts to not trust each other, the partnership won’t last very long.
The main goal of any partnership is to grow your business more with someone else than you would by yourself. It is important to remember this goal. The minute a partnership stops being productive, get out. If you do decide to end the agreement, you should make an effort to do it amicably. The investing community is a small one and you don’t want to get a reputation as someone who is difficult to work with. You can end an agreement and go your own way without damaging a relationship. The right partner can help grow your business in ways you may have never imagined. Take the time and find the right person for you.