In an attempt to find a real estate partner, either for the short or long term, that person may be closer to you than you think. Working with friends or family could provide the perfect partner on a deal, given the right circumstances. In order to the make the partnership work, each individual has to bring something to the table. This may be be knowledge, experience, handyman skills, money or access to financing. Working with the people closest to you could be the most rewarding experience of your life, but it could also be the worst if not handled properly.
In order to even consider working with friends and family, you must establish expectations. If roles are not clearly defined with numerous contingencies for each scenario, you could be looking at trouble down the road. You never want to hear “I thought…” with your partner. If one partner is expected to handle any work in the property, all costs, work expectations and time-frames need to be laid out. You should leave no stone unturned before you get started.
Money is the most common dividing factor in any partnership. Whether you are dealing with your best friend or family member, money still has a way of muddying the waters. If one person feels they deserve a bigger slice of the pie for their contributions, they may feel they are getting shorted after the transaction is over. Again, this has to be discussed before you start and when any changes are made. Closing deals and making money is great, but not at the expense of losing the people closest to you.
In addition to money, you should discuss the length of the partnership and what happens if one of you finds a deal moving forward. If one partner has been in the business for a while, they may not think that any new leads they get should be thrown into a partner pool. The more open, honest and transparent you are from the outset, the better your relationship and business will be. Too often partners get thrown together without discussing different scenarios and without thinking even a few weeks down the road. One good dinner or even a few cups of coffee developing a business plan, guidelines for how you will proceed and parameters for doing business can make all the difference.
Doing business with friends or family should not be an uncomfortable experience. This is why you are working together in the first place, to enjoy each other’s company while making money at the same time. If it becomes uncomfortable or you don’t feel it is working out, it is better to address the situation immediately. The people closest to you are more important than any one deal. Doing business with friends and family can be great, but only if everything is out in the open before you start.