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The Do’s & Don’ts Of Real Estate Partnership Structuring

Real estate partnership structuring isn’t a decision to be taken lightly, but rather an integral cog in the wheel that is every successful tandem real estate team. At the very least, aligning yourself with the right partner could very easily be the best decision you ever make. However, it’s just as likely that poor real estate partnership structuring can cripple growth. With that in mind, it’s in your best interest to mind due diligence and take your time vetting potential candidates. Only then will you be able to realize the true value of a great partnership.

With so much money on the line in your typical real estate deal, how do you go about determining the best real estate partnership structuring? The answer is relatively simple: do your homework and don’t rush into anything without being absolutely certain of your decision. If that’s not enough to get the ball rolling, however, there are a few more things you should do (and not do) to make sure your real estate partnership structuring will work in your favor. Let’s take a look at some of the most important do’s and don’ts when it comes time for you to consider real estate partnership structuring.

Real Estate Partnership Structuring Advice

Real estate partner

Do determine, beyond the shadow of a doubt, that you actually need a partner. Far too many real estate investors are enamored by the prospects of partnering with someone else before they even consider the alternative. And while I will never entertain the idea that partnerships can’t be extremely beneficial, they require careful consideration before committing to one. That said, I maintain that the only reason you should partner with another individual is because they bring something new to the table that you are currently missing. Perhaps they have access to capital or are more in touch with the local community. Whatever the case my be, identify what you gain from partnering up and determine whether or not the benefits outweigh the negatives.

Don’t assume the best partner for the job is someone that mirrors your own skillset. If for nothing else, a partner should be tasked with bringing something entirely new to the table. And while it’s perfectly acceptable for your prospective partner to share some the unique skills you already exhibit, they must offer a complimentary skillset. In other words, the partner you decide to align yourself with should fill a distinct void and meet a specific need. Only through the addition of a complimentary skillset will your business become more versatile and better prepared to handle what the real estate market has in store

Do your research and mind due diligence. Entering into a real estate partnership is nothing to take lightly, nor should you do so without thinking about things from an objective point of view. As I said before, you must be confident that you are entering into a partnership for the right reasons, but it’s equally important that you choose the right partner. Not only should they compliment your skills to maximize your usefulness, but they need to be someone you trust implicitly. In vetting your potential partner, it’s of the utmost importance that they can do their job well. What’s more, it’s up to you to make sure they can. You are the final gatekeeper, so make sure you are comfortable that your partner is competent.

Do take the time to establish clearly defined roles and expectations. Prior to entering into a partnership, it’s in your best interest to identify what will be expected of each individual and the roles they will inherently fill. In doing so, you will mitigate the risk of running into significant problems down the road. It’s worth noting that the more clearly you can define each partner’s respective role, the better. There should be literally no discrepancies as to what role you will play over the course of your involvement in the business. Who is going to manage the finances? Who will be responsible for marketing? Which of you will be tasked with negotiating at the closing table? Partners will need to know who is doing what well before the situation ever arises. That way you can set reasonable expectations each partner will be held to.

Don’t neglect your potential partner’s long-term goals and aspirations. In fact, understanding what it is your partner wants out of this exchange is invaluable, especially to up-and-coming businesses. If for nothing else, gaining a clearer picture of what your partner wants out of the impending partnership could make ore break things moving forward. That said, you need to be absolutely certain that each of your goals are in line with each others. There is no point in partnering up with someone that has different intentions. At best you will be working towards different aspirations. At worst, you could jeopardize the entire company.

Do conduct a self-evaluation. Real estate partnership structuring has more to do with matching qualified candidates than anything else. However, far too many real estate investors spend too much time evaluating their potential partner, and not enough time evaluating themselves. As it turns out, both are incredibly necessary. In fact, I maintain that an unbiased self-evaluation is just as important as an interview with a candidate, if not more so. A self-evaluation will identify the areas you are currently lacking in and those considered to be strengths. At the very least, doing so will give you a great starting point when trying to find a partner. Only once you are confident in what you currently bring to the table can you be certain of what to look for in a partner. It’s worth noting, however, that this only works if you are completely honest with yourself. Set aside some time to map out your strengths and weaknesses, and use what you learn to start real estate partnership structuring.

Real estate partnership structuring isn’t important, but rather necessary. If you hope to partner with someone to bring your career to the next level, you had better be certain it’s with the right person. With he right partner, there is no reason you couldn’t expect your business to grow exponentially. So make sure you mind due diligence and, above all else, see to it that the right structuring is in place.

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