NO. 4 Experience and Portfolio President Ronald Reagan said: “Trust but verify.” The phrase applies to real estate as well as politics. The most successful partnerships are not established on blind trust; they are built on a foundation of proven competence because the best indicator of future success is past results. One of the best ways to access new real estate opportunities is through a partnership, but you must be discerning about who you let in the door. Any partner needs to be able to demonstrate an extensive portfolio and industry experience. Here are some questions for evaluat- ing business experience and portfolio: • What does their current portfolio consist of (i.e., single family, apartments, retail, office, warehouse, land, etc.)? • In the last year, how many and what types of properties have they acquired? • How do they manage borrowing needs to maintain appropriate leverage in the portfolio? • Do they have any existing history of liens or judgments against them or any of their assets? • What assets are they looking to acquire in the next 2-3 years? NO. 5 Expectation Management Safeguard against preventable interpersonal pitfalls by setting clear expectations for your working relationship before problems arise. Expectation management ensures that each party can independently take ownership of their responsibili- ties. There should be no ambiguities about who is responsible for what. When the rules of the partnership
are clearly defined, it minimizes the risk of future drama or interpersonal issues interfering with the long-term success of your partnership. Here are a few questions to get the conversation going on
The five areas discussed here do not form an exhaustive list of what should be considered in a partnership; however, when paired with counsel from your accountant, financial advisor, attorney, or other investment professionals, you will be well on your way to evaluating a potential real estate partnership. Forming a partnership compounds your effort, experience, and access to commercial real estate investments. Together, you can achieve far more than you can independently. For those who invest passively, you must understand the experience, structure, and business plan of the GP with whom you invest your money. When undertaken with careful con- sideration, a real estate partnership can be mutually beneficial for both active and passive investors. •
expectation management: • Who is responsible for due
diligence for title, lending, attorneys, private investors, appraisers, etc.? • Who is responsible for ongoing property management after closing? • How are decisions made and who needs to be involved in the decision-making process? • What kind of ownership entity should be established for the acquisition? What will the governing operating agreement entail? How, when, and who is responsible for profit distribution? • What are the expectations for communication methods and standards (i.e., e-mail, scheduled calls, texts)?
Neil Timmins is an author, investor, and educator. After spending years investing in houses and $300 million in transactions, he graduated to investing
in commercial real estate. Now he educates others on how to do the same. Neil’s first book “Unicorn Hunting for Real Estate Investment Companies: The Complete Hiring Funnel” was released in 2021. He hosts the popular podcast “Real Grit.”
32 | think realty magazine :: january – february 2023
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