5 Things To Know Before Partnering on a Real Estate Deal

If you are actively working as a real estate investor, partnership with other investors is inevitable. Reasons for partnering up will vary depending on the person and whoever you partner with could put a risk in your potential profit. Therefore, here are 5 things you need to know before partnering on a real estate deal:

1. Know your options before going into the partnership.

Being alone has its limitations, yet it would be wise to think about the reasons why you should do it alone. There are options available to you if only you know where to look.

Investors who choose to partner with others do so to gain more capital. Besides, not everyone has a large sum of money just lying around. However, one should consider applying for a loan or borrowing money from friends and family. Once the loan is paid, it’s gone forever. But with a partnership, you will only take a portion of the profit for as long as you work together. Opting for a loan will allow you to earn significantly higher in the long run.

Another problem investors face is fear. Real estate investing may be intimidating for a newbie and there are a lot of risks in this career. Because of this, investors choose to partner with others to feel safer. However, you can instead choose to do research and ask for advice from experts in the field. Understanding what you need to do and how to go forward will help you conquer your fears.

2. Acknowledge what you don’t know

There is no single person who knows everything about real estate investing. It is constantly changing and there is too much information to absorb. Still, this should not stop you from trying to learn more about the business. You could still be an expert to at least one area of real estate investing. But first, you must know what you don’t know.

Not knowing where to start is a common problem that has a simple solution: ASK QUESTIONS. Asking questions to investors that have much more experience than you can help guide you to where you need to start and then move forward from there. Do not also be afraid of doing trial and error. Experiencing what works and what does not is a great way to learn stuff.

Having an experienced investor to ask questions whenever you need guidance is a huge help even if you consider yourself as an expert yourself. It is also healthy to have someone to bounce ideas with. Also, researching also helps. Google is just a few clicks away.

3. Assess your potential partners.

A lot of people tend to oversell themselves but do not deliver in their work. Which is why you should not partner with someone based on what they tell you about themselves. Make it a habit to know somebody for a few months before trusting them with working with you. Besides, actions speak louder than words.

Getting to know your prospective partner will also allow you to make sure that they have no criminal records, are organized when working with deals, and not a scammer. Referrals from your trusted network of investors could also help validate his/her capabilities and identity.

4. Always prepare a written contract.

Business partners taking advantage of each other is a scenario that cannot be dismissed. There are times that they will abandon ship if everything unexpectedly goes downhill. Because of this, it is important to have a contract or written agreement that details each other’s responsibilities and other arrangements that both of you made in case your partnership does not end well. This will keep everything formal between all parties involved and save you from unnecessary stress.

5. Manage the risks you’re taking

It is important to be 100% confident that the money you invested is protected and will be accounted for, especially if you are the major financial contributor in the deal. Capital for real estate investments does not alway has to be “dumb money.” By taking control of the risks you take with you and your partner’s money, you can assure that it will return to you with bonuses. However, your partner must be someone experienced, responsible, and trustworthy.

To conclude, you must first reflect on your situation and think long-term. Through this, you will be able to evaluate what’s the ideal setup for you and your future.