Real estate investing can be as easy as flipping real estate and as hard as managing an entire apartment building. While you can start real estate investing on your own, having a partner brings a lot of benefits to the table, from money to connections – and more.
Many people involved in real estate investing bring on a partner for one simple reason: money. A partner contributes money to the initial deal in exchange for equity in the property. This helps you afford a better property than you would be able to procure on your own. With someone extra on your team, you may have enough cash to be able to make the jump from flipping real estate to investing in commercial real estate or a multi-family property.
Partners can also bring great connections into your business. Whether they know a fantastic real estate lawyer or they’ve done business with other investors who may be able to help, a partner with lots of connections can be a huge boon to your business. A well-connected person can be your ticket to doing more deals or making them happen more smoothly.
A business partner with more experience than you can function as a mentor or coach, helping you learn more about the business while also contributing to your deals. This can be immensely helpful – a good mentor is a must-have when you’re in the real estate business.
You may also consider adding a partner to your business if you’re involved in flipping real estate. In this scenario, your partner may contribute cash, labor or both. Exchanging labor for equity is called “sweat equity,” and while it’s not common in many real estate investing companies, it can be a fair exchange for a flipping business.
Of course, there are a few potential negative aspects to having a partner. The first downside you’ll face is lack of control. When you’re running a real estate investing business on your own, you make all the shots. Bringing in a partner means giving up some control over your business. If your partner is a friend, any disagreements may wind up spoiling your friendship. Always treat your partnerships as a business relationship and get a contract outlining the specifics of your agreement. It may seem silly to do this with a friend, but it’s not worth risking your money – and friendship.
Before you bring on someone else, make sure you consider the benefits and downsides to having a partner. You may decide that it’s worth your while, or that you’d rather hold on to control. No matter which decision you choose, make sure you give it some thought beforehand – you’ll be glad you did.