Becoming a successful real estate investor is a challenging endeavor to say the least. It not only requires a considerate amount of time, money and resources to be triumphant, but the mindset and motivation to persevere when things get tough. While they may not know it yet, the answer to most investors’ problems are real estate partnerships.
A well-balanced real estate business partner offers numerous benefits for investors. They have the capability to provide not only a wider pool of knowledge, skills and contacts, but moral support as well. For those looking to expand their business or just get it off the ground, joining forces with like-minded individuals can be very advantageous to those who take the appropriate steps, including tax benefits and access to more working capital. The following are some of the tangible and intangible benefits real estate partnerships provide:
5 Benefits of Real Estate Partnerships
A partnership is the shared belief in one common goal and it’s essentially based on the notion that the ‘whole is greater than the sum of all its parts.’ It’s an alliance to mitigate risk, maximize potential, and provide what would’ve otherwise been unattainable working alone. It’s very similar to team sports in the aspect that everyone has to work in unison to achieve the same goal. That said, finding a business partner should be at the top of some investors’ lists, whether they know it or not.
Although two heads are generally better than one, especially in business, not all partnerships are free of risk. Unfortunately, the challenges from shared decision-making can become an issue over time. For those considering making the leap, the following will highlight the benefits of real estate partnerships:
1. Combined Talent
The ability to merge multiple talents together to form a better, more refined team is one of the major selling points of a real estate partnership. Teaming up with a partner is advantageous for the mere fact it allows investors to play to individual strengths and the ideal partnership is one where both people bring something different to the table.
“You need to find a business partner that brings something new to the table that you don’t already have; only then will you truly tap into your potential,” says Than Merrill, my colleague at FortuneBuilders and CTHomes. “It won’t do you much good if you bring someone on board with the same attributes. The holes you have in your investor strategy will remain empty unless you work with someone specifically equipped to fill them.”
Knowing their strengths and weaknesses will also help to define each partner’s role in the business, including what is expected from them. While real estate investment requires the ability to wear several different hats, forming a partnership has the capability to enhance the overall performance of the business.
2. Expanded Network/Opportunities
A solid network of contacts is one of the most powerful tools a real estate investor can have, and a necessity to grow one’s business. With a partner in place, networking can be taken up a notch with the addition of their contacts as well as future contacts that are made by them. In addition, a real estate partnership can help magnify the amount of exposure you receive, helping to essentially double down on your efforts to spread your message to potential buyers, sellers, contractors and more.
3. Shared Responsibilities/Risks
Investing in real estate requires a considerate amount of time and energy to be successful. Like any investment, it also comes with a certain amount of risk. Forming a partnership, however, can easily help alleviate the degree of responsibilities associated with investing in real estate, while also splitting the amount of risk involved. In essence, a partnership will allow investors to share both the risks and rewards associated with real estate investment.
“There are many different ways that partnerships can work, but it is important to know and understand who is doing what,” says Merrill. “Nothing can derail a partnership quicker than unrealistic expectations or uneven work allocation.
Partnerships can work in an assortment of ways, but the first step is to decide who does what. This allows for transparency and accountability between investors, as each partner understands what is needed from each other to succeed.
4. Financing Options
Financing for real estate is one of the many challenges investors face, especially when first getting started. The addition of a partner can help to not only alleviate the costs associated with investing, but increase the amount of working capital as well as borrowing capacity your business has. Additionally, partners can choose to structure their partnership in a way that achieves the appropriate risk-adjusted return for each investor and their monetary contribution.
In some cases, a partner can assist in finding new sources for financing and working capital. He or she may have a slew of contacts in regards to lenders, whether private or hard money, which is never a bad thing to have by your side.
Investing in real estate can be quite intimidating, especially for beginners. However, the one intangible benefit a real estate partnership brings is motivation. Having a partner in place who shares the same values and aspirations as you will help to not only drive the business forward, but provide support when things awry. A quality partnership will help to build confidence as well as provide a foundation for reassurance. Knowing you’re not alone in your real estate venture can be comforting, as well as revitalizing.
As an investor, a real estate partnerships represent a unique opportunity to take your business to the next level by focusing on the tasks that best suit you and your skill-set. That also means a better chance of turning properties over faster. In the end, forming a business partnership comes down to finding someone with not only the same goals and vision as you, but someone with attributes that compliment your own. No one said it would be easy — only that it would be worth.