Real Estate Investing is one of the safest ways to increase your net worth. Whether you are just starting out or have been an investor for years, real estate investing with a partner can be a powerful and profitable way of growing your real estate business.
The Benefits of Forming a Real Estate Investment Partnership
Having a real estate investing partner has many benefits. We list 4 benefits that make it a lucrative option for a real estate investor:
- You are able to accomplish more as a team than as an individual. As one person, you are going to have limitations based on your personal skillset, manpower, bandwidth, expertise, etc. Finding a partner with offsetting skills drastically increases your output and ultimately your rate of return.
- Mitigate risk and limit your personal exposure. Having two sets of eyes that are working together on the same set of common goals will not only increase output, but it will also help you divert some of your risks. Such as the risk of making catastrophic mistakes because of inexperience or being spread too thin. You and your partner’s combined experience and insight translates to more projects completed quicker. This could also mean fewer mistakes and higher returns.
- If you have been investing for any period of time, you know there are going to be big swings of both highs and lows in the market. Having a partner allows you to share in the highs and lows. Together you can enjoy the highs and build each other up during the low points.
- Maintain a work-life balance. When you’re on your own and you stop, so does your business and you lose your momentum. Things that bring you happiness like family vacations or occasional breaks seem impossible. With a partner, you can have someone to lean on when it’s time to step back and decompress.
Partnerships can help you reach bigger profit potential. With that being said, consider that partnerships have some pitfalls too. Not all relationships are milk and honey all the way through. Sometimes they go sour. When entering in partnerships, clearly identify your roles, have a conflict-resolution in place, and make sure that you are partnering with the right person.
What To Look For in A Partner
When evaluating what to look for with a real estate investing partner, first you need to be introspective. Compile a list of what makes you a good partner. What are YOU bringing to the table? Here is a list of skills/traits that great investors possess:
- Lead Sourcing/Lead Generation
- Deal Analysis/Market Analysis (ability to accurately calculate current market value as well as after renovation value
- Access to capital or the ability to obtain capital
- Contract analysis
- Rapport building, negotiation, and deal closing skills
- Organizational skills
- Contracting or sourcing skilled trades
- Rehab oversight to stay on schedule and budget
- Design as well as choosing and sourcing materials
- Budgeting and accounting
The above list is not a comprehensive list of every skill required but a good place to start. Out of this list, which traits do you consider your strengths, and which are your weaknesses? From this standpoint, you can start to determine the offsetting skills you should be looking for in a partner. It’s not an exact science and it’s also great if you and your partner have overlapping skills, but at least you have an idea on what an ideal partner will look like.
Stay tuned for the next article where we provide information on where to find great investment partners and how to protect yourself when entering into a partnership agreement.
