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WAYS TO MAXIMIZE THE CHANCES OF A SUCCESSFUL REAL ESTATE PARTNERSHIP
usually means you share joint accountability for the project. This reduces your liability to the amount of your total share in the project, which can limit your losses in the event the project isn’t a success. Note: Of course, your specific partner- ship agreement will delineate the terms of liability, distribution of returns, etc. Always work with an industry profes- sional to make sure that your partner- ship agreement is structured correctly and legally binding. A partnership also comes with certain dis- advantages, of course. First and foremost, it reduces your share of the profits. Second, both partners must support all business decisions, and reaching that consensus can be challenging. For example, you might want to hold off on sell- ing a rehabbed property in order to get a better price, but your partner wants to cash out. How do you solve that dilemma? Some of the most challenging partnerships are those with friends or family members. In these situations, it can be extremely difficult to keep the partnership purely professional. This is especially true during trying times. DISADVANTAGES OF A REAL ESTATE PARTNERSHIP
T he key to entering into a good business partnership is to go in with your eyes wide open. Keep the following tips in mind:
1 FIND A PARTNER WHO COMPLEMENTS YOU For example, if you are putting up the funds, find someone with proven experience in flipping and/or managing real estate, and vice versa. 2 VET YOUR PROSPECTIVE PARTNER You’ll be relying on this person, so don’t be shy about doing your re- search. Begin with a general Internet search to find information about his or her background and experience. Check public records, business ratings, corporate filings, and court filings. If everything looks in order, request to see his or her tax returns for the past seven to 10 years. Your prospective partner will probably be doing their homework on you as well, so be prepared to share your financials. Note: In some cases, you may not wish to simply share this private information with someone who may be, to you, an unknown. Some investors require potential partners to sign a non-disclosure agree- ment before revealing the inner workings of their businesses. Work with a trusted legal professional if you need such a document for your own use, and have these documents reviewed before you sign them yourself. 3 ASSIGN FINANCIAL VALUE TO EACH PARTNER’S CONTRIBUTION Both partners need to be able to put a financial value on their contri- butions. This will allow you to determine if you are both contributing equally or if one of the partners is bringing more to the table than the other. If the latter is the case, you should re-think the usual 50-50 split. 4 GET EVERYTHING IN WRITING Never, ever, go into business with a partner without a watertight contract. Work with an attorney to nail down every aspect of your partnership, from what each person will contribute to your objectives for the deal and what happens in the event of conflict or dissolution. The better your contract, the better you’ll be protected.
They say success in business depends on who you know, and it’s certainly true in real estate. Private Money Lending Guide is here to help you build relationships with private money lenders who specialize in real estate investments, so you can take your business to the next level. BUILD RELATIONSHIPS WITH PRIVATE LENDERS.
BE CAREFUL, BUT CONSIDER PARTNERING UP
Working with a partner can be a great way to get started in the real estate investment busi- ness. Just remember to weigh the pros and cons first. If you do decide to enter into a partner- ship, make sure it’s one that’s well considered, well researched, and well documented. •
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Bill Green is the founder and CEO of LendingOne, a provider of real estate bridge and rental loans for non-owner occupied real estate investment prop- erties, and Crestar Group, a group of private equity,
Build beneficial relationships with private lenders for your next real estate investment project!
specialty finance, and real estate businesses, and the author of ALL IN: 101 Real Life Business Lessons for Aspiring Entre- preneurs. He may be reached at bgreen@lendingone.com.
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