- A Real Estate Partner May or May Not Be A Good Fit For You. Here’s A Video on Qualifying Real Estate Partners for Real Estate Investors...
Hi, this is Frank Chen with REIClub.com, the only site you need as a real estate investor. Today I’ve got a quick video on real estate partnerships and whether they are a good fit for you.
Everyone has heard the horror stories of business partnerships, the disagreements, financial loss, relationships/friendships ruined... Although these are hard to avoid, they’re not impossible as long as you do your due diligence.
So before committing or locking yourself into a potentially devastating partnership, you absolutely have to qualify your potential partner, even if they are your friend or family.
Qualifying Your Future Real Estate Partner
**My first tip, don’t partner with family or friends unless you absolutely have to.
- Experience - How many years?
- Types of Deals - Wholesale, buy and holds, short sales, REO, probates?
- Number of Deals - Have them provide proof
- Expertise - Good with numbers? Good eye for decorating? Rehab experience? Great at marketing?
- Financial situation - Any debts? credit issues? Potential issues that could kill a deal, or leave you with the “bill”
- Network - How big is their real estate network? Know buyers? contractors? Agents? Title companies?
***It’s important to recognize each others strengths and weaknesses and how you can best benefit working together.
What the Real Estate Partnership Agreement Should Say
- Have in writing - the specific roles between any participating member, also...
- What the specific responsibilities and expectation are for each role (If you have an Acquisition Manager, don’t just put “Find deals”, be specific.)
- How each person will get paid, and when - Profit share(%)? Tied to the re-sale? How far after closing can they expect to get paid?
- Is there a review period? - Deal by deal basis? Or until further specified?
- Get the Agreement signed.
- Not 100% necessary to create a joint LLC until things become consistent, probably better to each have your own.
Overall Benefits When Partnering On Deals
- Pool your resources - Easier to qualify for financing
- Double analysis - One may catch something the other doesn’t
- Dividing tasks gets more done
- Expanding your existing network
- Accountability - this is huge, it’s easy to get complacent
- Split Risk - In case things go wrong, you have someone else to buffer the blow
Overall Cons When You Partner On Deals
- Splitting profits on top of all the fees
- Possibility of relationships falling apart
- Legal ramifications
- Greed can get in the way once you start seeing bigger profits
Again, this is Frank Chen with REIClub.com. Please take the time to leave your comments for this video below and please subscribe to our YouTube channel so you’ll be automatically notified when we upload more quick video tips for you. Take care and good investing.