Real Estate Partnership

Real Estate Partnership

One of the best ways to improve your investing efforts is to form a real estate partnership. This is particularly true when you find others who have strengths in areas where you need improvement. However, while most partnerships offer considerable advantages, there are things you should investigate before making the commitment.

Who Does What

In other words, how are you going to divide up the responsibilities? All too often, people agree to partnerships without defining what they will do as part of the overall effort. So, when discussing a partnership start off by asking who should be responsible for what areas and putting that down in writing. If you are not comfortable with the roles you have been assigned, you’ll want to speak up quickly so that you don’t wind up carrying the majority of the work or doing something that you are ill-suited to accomplish.

Splitting the Profit

Not all splits are 50/50. In fact, you may find that a 65/35 or even greater split may be more suitable depending on the work or investment that is involved. Basically, you should allocate the split based on what you are comfortable with taking depending on your responsibilities. If you are comfortable with taking just 30% even though you did most of the work, at least you discussed the matter and agreed to it before the transaction began.

Communicate

Are you going to meet daily, once a week, or just when a deal is being created? Another important factor when it comes your partnership is how frequently you plan to communicate with each other. Remember that too much talk can be just as bad as too little, so make an arrangement that both of you are comfortable with and provide a way for immediate communication when something important arises in your real estate partnership.

Contribution Levels

Investing is also about allocating expenses, so you will need to agree on who pays for what. The last thing you want is to be accusing each other of not paying for fees or other items instead of making money while investing. So, map out how expenses will be paid and an agreement system for any type of dispute along those lines.

Get Out of a Deal

While you want every deal to go smoothly, there will be occasions when it is best to bail out. When things do not go as planned, you should have a way to alter course and change your plans to fit better circumstances. For example, the house you are about to sell may work better as a cash flow property or that land you are trying to sell may need to go for a lower price. In any case, have a system for discussing alternatives in case the original deal goes south.

How to Settle Disputes

Just like in marriage there will be disputes and even arguments along the way. The better you plan for resolving disputes, the easier time you will have in getting past your disagreement. It pays to know that the world will not end if you don’t get your way, so approach the dispute from a position of knowing where you stand and what reasonable alternatives exist. At the very least, you’ll take some heat away from the dispute when it happens in your real estate partnership.