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One way that people get a toehold in the real estate investment arena is through partnering up with another individual. Getting a partner can be risky in any situation, and real estate is no exception. Here are a couple of tips when it comes to deciding on whom to go with in your real estate venture.
Level of trust
Real estate means a hefty layout of money, so you do not want to go in saddled with someone who you do not trust completely. You should choose a partner who you know well and with whom you have worked closely on several occasions, whether in the real estate area or in some other venture. Lots of people will turn to family when it comes to partnerships, and this is likely to keep you together during trying times. Keep in mind, though, that you will have to deal with your partner during tough times as well as good. If you feel that your family cannot stand up to the strains that a financial tough spot can create, then it is best to go with a partner who you will not need to see every major holiday.
Expertise
The partner you choose for your venture should ideally complement you in terms of strengths and weaknesses. For example, if you are a proven financial guru and your partner is a hands-on kind of person, you might consider a financer/improver relationship. Your partner might have extensive experience in real estate, but you have proven your skills when it comes to finding great bargains when it comes to labor or getting down to a task of home improvement. Many such partnerships will mean some kind of splitting of the profits from each venture, and usually it is on uneven terms depending on the commonness of the characteristics that each person brings to the table. If you have trouble reaching an agreement, walk away, because the issue will only compound.
Buying out
In real estate partnerships, especially ones between people relatively new to the arena, it is not unusual to have one partner ready to leave at the first signs of trouble. Remember that real estate investment is like the stock market, and the only way to realize profits is to wait over time. The recent real estate boom had many people high with illusions of quick wealth, but as most can see the market is just as prone to cooling off. In fact, the slowdown is much more indicative of a normal real estate atmosphere, where prices continue to rise but at a much slower rate and with individual pieces taking longer to sell.
When it comes time for one partner to leave the partnership, it is important for both parties to behave respectfully, fairly, and responsibly. There should be no additions tagged on because one partner want out while the other wants to stay in longer; if you are in the investment 50/50, then the remaining partner should pay 50% to the exiting partner, after any outstanding debts are accounted for. Such a settlement ensures that both partners exit according to their original agreements, and the potential for an acrimonious situation is greatly reduced.
Partnerships are a great way to start out in the real estate market, and there are many examples of partnerships that have lasted year after year, through successes and losses. These types of partnerships usually started long before the investments did, and the initial pairing was based on a legacy of mutual respect and trust. If you are looking to go with a partner to get into real estate, choose carefully and always remember to be fair about roles and investments.
GBrey |
