Have you ever considered developing a working real estate partnership with anyone?
Working in tandem with a real estate business partner can be very advantageous to those who take the appropriate steps. I, myself, have found unparalleled success teaming up with several partners. However, it is not enough to simply team up with someone and expect results. Like anything else, a real estate business partnership takes work and dedication. Only those who go about it the right way will see their real estate business partners for what they truly are: an invaluable asset.
That said, choosing the right real estate business partner is of the utmost importance if you hope to realize your true potential. Before you even consider forming a business partnership with someone, be sure to vet them carefully. At the very least, they should meet the following criteria:
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Understanding how to vet a business partner is ultimately the most important step in scaling a real estate business. If for nothing else, it is the one thing that can simultaneously mitigate risk and maximize potential. Done correctly, partnering up with another individual in the real estate industry can be the best move you ever make. That said, be sure you are comfortable with the answers to the following questions before committing to a partnership:
Evaluate Your Partner’s Strengths & Weaknesses: The ideal real estate business partner will not necessarily mirror your particular set of skills, but rather compliment them. When you start vetting potential partners, you will first want to determine what it is they will bring tot he table. If they are capable of filling the gaps you have in your business, there is a better chance of their services benefiting the overall success of the company. However, if their particular abilities are more in line with the ones you currently exhibit, it may not be worth sacrificing profits. You will want to partner with someone that can do what you can’t; only then will your business realize its full potential.
Discuss Your Goals, Values & Methodologies: While the individual skills of each business partner should compliment one another, there are several fundamental aspects that must align to form a truly talented partnership. Most notably, investors will want to make sure several intangible attributes are in place on both ends. Before you work with a prospective partner, you need to be on the same page regarding your goals, exit strategies, work delegation, financial commitments and length of agreement. The more you have on the table, the less chance of there being any confusion down the road and the smoother your partnership will be.
Set Up A Timeline: Real estate business partners must have more in common than aspirations; the timetable in which each hopes to achieve said goals should be similar in nature. A distinct difference in the amount of time each person intends to invest into the industry can create a schism between partners that isn’t necessarily destructive, but rather difficult to get past. If, for instance, one business partner has every intention of working for the next decade, but the other has no reason to work together for more than a couple of years, a business partnership may not be in the cards. On the other hand, those with a similar timetable could benefit from one another. Before committing to a business partner, see to it that you will still be working together in the future.
Review Past Deals: It should go without saying, but a real estate business partner’s previous work experience should go a long way in helping you decide whether or not they will make a good partner. Their previous work is essentially the most accurate measure of their experience, or at least what they claim to be able to do. Mind due diligence and research their past deals, as they will serve as a window into their work ethic. However, don’t stop there; delve in a little deeper and find out what others think of them. The reactions you will get will tell you a lot about working with the partner in question. Again, real estate is a people business; you will want to know the opinions others have of your potential business partner.
Assess Your Own Strengths & Weaknesses: While this question has less to do with vetting your potential real estate business partner, it has everything to do with determining what you will need to look for. As I have said before, you must work with a business partner that compliments your current arsenal. However, to know what to look for in your partner, you must first understand your own skill set. Without knowing what you can actually bring to the table, there is no way of knowing what you will require of a partner. Before you even consider working with someone else, be sure to vet yourself. With an unbiased reflection, take note of your strengths and weaknesses. From there, proceed to note what you may offer a business partner, as partnerships are a two way street.
Now that you know what to look for in a business partner, let’s take a look at how they can help your real estate business.
A good business partner will compliment your shortcomings and fill in the gaps your business is currently missing.
A business partner will allow you to scale your business and increase profit potential.
The amount of time spent on respective deals will be drastically reduced with two qualified professionals on the job.
Gaining access to a partner will also give you access to their contacts, which is invaluable in this industry.
A good business partner will mitigate risk.
Only once you have identified the perfect business partner, can you even assume to understand how valuable they will be over the course of your real estate career. That said, assuming you are fortunate enough to find yourself in business with the right partner, their presence alone should be enough to take your real estate career to the next level.
As I am sure you are already aware, real estate is a people business; nothing has a larger impact on your success than the people you work with on a daily basis. For what it’s worth, the people you develop a working rapport with are your greatest asset, and business partners are no exception — or at least they shouldn’t be.
In working with a business partner, your number one priority must concentrate on finding the perfect compliment. If for nothing else, you are not looking for someone with the same skill-sets you already exhibit, but rather an individual who’s particular attributes compliment your own. In other words, you need to find a business partner that brings something new to the table that you don’t already have; only then will you truly tap into your potential. It won’t do you much good if you bring someone on board with the same attributes. The holes you have in your investor strategy will remain empty unless you work with someone specifically equipped to fill them.
For instance, if you have the appropriate funding yet can’t market to save your life, any prospective business partner had better be able to market a property. On the other hand, if you can market with the best of them, yet don’t have the funds to do so, you may want to consider bringing on business partner with access to capital. It’s a relatively simple concept, yet one far too many investors fail to grasp: working with a good business partner will elevate your business in areas you are less than equipped to handle by yourself.
It is important to note, however, that working with a partner doesn’t necessarily mean that you have to miss out on profits. While it is true that most business partners split their earnings, the real estate industry offers those with a sound work ethic the ability to make as much money as they are willing to work for. For better of for worse, there is no cap to how much a respective partner can make in a real estate partnership. So while partners may need to split profits, their combined efforts typically result in more incoming capital; they are essentially splitting more than the average solo investor would make. While there are certainly exceptions, it’s not hard to see why the combined efforts of two experienced real estate investors would make more than an individual entrepreneur in the same industry.
That said, working with a business partner enables each individual to focus on what they are good at. If you put in the work upfront and carefully picked a real estate partner, there is a good chance your time will be spent wisely. If for nothing else, your partner will probably focus on the tasks they are best at, leaving you to do the same. Not surprisingly, results will improve when competent individuals are in charge of completing tasks they are more or less great at.
Not surprisingly, having a partner essentially limits the amount of time you will spend on a respective deal. Two people, for example, are much likely to finish a project faster than a single investor. That means partners have a better chance of turning properties over faster, given their combined efforts towards a similar goal. While that essentially lowers the amount of time spent on a property, it means you can flip more homes in a shorter period of time.
It is worth pointing out that taking on a real estate partnership will most likely change the legal entity of your business. Fortunately, partnerships are the simplest structure for two or more people to go into business with each other. If for nothing else, a partnership is the product of two or more people (or entities) working together in a business. Not unlike other legal entities (like S Corporations or LLCs), partnerships are flow-through business entities; that means both profits and losses will be absorbed by the respective partners.
With the right pieces in place, it’s easy to see what a good real estate business partner can do for your career. However, those that have yet to work in tandem with another are probably less aware of the benefits that have become synonymous with great real estate partnerships. If you have taken the right precautions outlined above, there is a good chance your partnership will be able to complete any task that presents itself. Real estate is a complex business if you let it be, but there is no reason a real estate partnership can’t simplify the process.