Partnerships for Real Estate Investing

Partnerships can be very profitable. They can be a very lucrative decision for a real estate investor. The definition is a legal relationship between two or more persons contractually associated as joint principals in a business. In real estate, if you have time, knowledge or money, then you are a perfect. Candidates to partner with would be someone with different qualifications. If you have time and knowledge, but lack the money then you could go with a partner. Most of us don't have all the qualities, therefore other solutions give us more flexibility for buying property, partnerships are just one solution to this problem.

Partnership can work with lease options. If you find a good home that would sell for a good profit on an option, but the seller can sell on option, they need their cash out of the home. You would have to pay cash or get a mortgage to make it work for the seller. If you don't have cash then bring in a partner who has cash. Getting half the profit is better than getting no profit. In this case the partner with cash would pay for the home, with a reasonable rate, or require a mortgage for a home. The partnership pays the mortgage payments with the rent received from the home. When the tenant/buyer exercises their option - all profits are split or rolled back into the company for more deals. Partnerships can be flexible and worked any way both partners want.

It's important to pick a partner. Be careful about friends as friendships usually end over business. If you are the money person, then choose someone who is aggressive, detailed on record keeping, honest, fair, trustworthy and experienced. If you are the manager of the property, then you want all of the above, but most important, you want someone who is hands off. They must trust you to do your part of the business.

Create a legal partnership agreement. All details of how the partnership will work, should be worked out, document and sign prior to doing any business transactions.
go through your plans together. Go through worse case scenarios and make sure that all of your solutions are worked out before they happen. Things like what happens when tenants don't pay, or what if something breaks, who will represent if necessary to go to court? Having an attorney draft the operating agreement is a very good idea. Both of the partners should sign. Each of the partners should get a copy. Poor communication and lack of documented procedures is the number one reason why partnerships have misunderstandings. Misunderstandings cause hurt, fear, and disappointments, which bring partnerships to ruin.

Many successful investors have partnerships with multiple people. Partnerships create synergy. With synergy you can do more than you could by yourself.

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