186: Finding a Real Estate Investing Partner

SHOW NOTES FOR EPISODE 186: FINDING A REAL ESTATE INVESTING PARTNER

As a real estate investor, you might have heard the pros and cons of real estate investment partnerships. In today’s episode, Bill outlines some of the reasons you might want to consider a partnership, how and where to find a partner and tips for maintaining a successful partnership.

As a real estate investor, you might have heard a lot about real estate investment partnerships. Therefore, if you are considering one and wondering how and where to find a business partner, keep listening.

As real estate partnerships are common in the real estate investing business, you might want to consider pursuing a partnership.  However, it is not as easy as you think.   There are many aspects associated with it that you have to take into consideration.

In this podcast, I’m going to tell you how and where exactly to find a business partner.  But first, we are going to talk a little but about why should you consider a partnership.  I am also going to give you tips on making your real estate partnership a successful one.

First: Why partner up?

There are five good reasons.

1. Partners can Provide Resources

Real estate partnerships are very beneficial for all parties, especially if one of the real estate partners lacks some resources.  Therefore, you should find a business partner who will help you bring resources together.  Whether you have the money to invest in real estate or not, a partner will not hurt.  You do not have to just starting out in real estate investing to benefit from a partnership.  A real estate partnership could also help with growing your business.

2. A Partner Can Also Help you Financially.

For example, if you are applying for a loan and you have to make a 20% down payment while you only have 10%, then a real estate partner could be the ideal solution for you by providing the addition 10% down payment needed.

3.  Spliting the Workload

Another reason for you to find a business partner is splitting the workload. Investing in real estate requires a lot in terms of time and effort.  It is associated with many tasks.  Whether it is property management or legal matters, or even maintenance, it is still a lot to do.  So, having a real estate partner with whom you can divide these responsibilities is an advantage.

4.  Spliting the Risks

Splitting the risks also comes with real estate partnerships.  You must know for sure that investing in real estate comes with risks besides the profits.  Therefore, find a business partner that will be willing to take part in these risks with you.

5.  Bringing Connections

Finally, partnering up in the real estate investing business helps you bring connections together.  It is always a good idea to find a business partner with good connections. The right connections make a business a lot easier. Also always remember, the more the better.

Second: How to find a business partner?

Here are some tips on how to find the right business partner for your real estate investing endeavor:

• Check out your partner’s source of money:  The real estate business depends greatly on cash.  So, it is a good idea for you to check your partner’s source of capitalization.  This is especially important in case of any unexpected situations.
• Make sure you agree on the objectives:  By objectives, we mean goals and strategies. It is important to find a business partner who agrees with you on your business objectives.  Otherwise, this real estate partnership is going to fail and, of course, you are the one to suffer the consequences.
• Follow the Five-Deal Rule:  Well, this is a very important rule for every real estate investor to know about.  It is basically asking potential partners to tell you about five of their successful deals. First of all, you must know that it is OK for you to ask that question, so do not be shy or embarrassed. Second, you can also ask for documents that support their stories. Third, it is a great way to protect yourself from fraud.  The last thing you want is to find a business partner who will walk away with your money and efforts.

Third: Where to find a business partner?

There are many places where you could find a business partner for your real estate investment business.  Here are some suggestions:

• Family and friends:  It is always a good idea to look for a business partner among your family and friends.  In fact, this is one of the most common places to find a business partner. It is especially beneficial since they are people that you know and trust, so your real estate partnership will be built on trust.
• Connections:  You can also find a business partner through your connections.  You might know an investor or even a real estate agent who would want to invest in real estate.  You can also attend investors’ clubs meetings and events where you get to directly connect with them.
• Real estate investment associations:  It does not matter whether it is a local association or a national one.  As long as it is going to help you achieve your goals, you should go with it.
• Go online:  Really, what is it that you can’t find on the internet these days?! Go online and subscribe to various online forums that bring together real estate investors.   Connect with them and see if you could find a business partner amongst them.

Fourth: Tips for a successful real estate partnership

Now that you know how and where to find a business partner for your real estate investing endeavor, here are some tips on building a successful real estate partnership:

• Do the due diligence:  Sure enough, you have to get this part done. In order for you to be able to build that partnership on trust, you must do the due diligence.  You must ask around and double check information about your real estate partner.
• Set your responsibilities:  It is important for each of the partners to know their role in this investment business.  Divide your responsibilities in order to avoid any issues in the future.
• Agree on profits:  Before getting into a real estate partnership, you must agree on the profit percentage that each of you gets. For example, you could agree on 50/50 profit split. Or you could agree on 70/30, depending on what you have both invested.
• Write it down:  Make sure you have the deal written and signed by both parties.  This is crucial for having things cleared out, and it serves as a proof in case of any legal problems in the future.
• Develop trust:  Trust is the foundation on which your real estate partnership will stand. Therefore, make sure you are able to develop that trusting relationship with your partner.  If, for some reason, you find it hard to build that trust, then it will be hard to further work with your real estate partner.  After all, your main goal, aside from making money, is for this partnership to go as smoothly as possible.

Fifth:  Take great caution in forming a partnership…

• It is a serious action
• Carefully vet your potential partner
• Have your attorney draw up the papers
• Continually meet, evaluate and assess if the partnership is working for both partners

Bottom Line

Real estate partnerships are a great way for you to invest in real estate, especially if you lack experience and/or resources.  The right partnership can serve you well if you have the money to invest or you don’t.

I recommend reading a couple of good books that address partnerships: Traction and Rocket Fuel.

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