Real Estate Partnerships

When I started out in real estate I had no experience, no money, and no credit. I was not yet an attorney – in fact law school had not even occurred to me. I was working in corporate America and I had a dream of real estate millions – but my fear was holding me back.

Real Estate Partnerships Work

I had friends who felt the same way – so we decided to partner up. Since then, my friends and I have made millions of dollars together. We helped each other get over fear, we raised money from friends and family, split up the work and shared our expertise to deal real estate deals together. I doubt I would have ever gotten started without my various partners.

I bet a partnership would help you also. Help you do bigger deals, get over your fears, bring resources you do not have, and split up the work.

Partnerships can be great, but they do not last forever (eventually someone decides they no longer want to work together or a partner dies). When partnerships end, they can end badly in disputes and even litigation! That is why smart investors use written partnership agreements to bring the issues out in the open and reach an agreement on key points before the partners have money, work and emotion tied up in a deal.

One of the main hold backs for investors is understanding what they need to discuss with their prospective partner and having a form to work with.

There are issues you must discuss with your prospective partner before doing business as a partnership. Here are ten items you must discuss before entering into an agreement with a prospective partner:

Top Ten Discussion Items For Real Estate Partners

1. How much money will each partner put up.

2. Who will be responsible and pay into the business if extra money is needed due to cost-overruns, slow selling, or for any other reason?

3. Whether either party can sell to a new partner without the existing partners' permission. If the non-selling partner does not want to give permission how can the partner who wants to sell get out?

4. The exact nature of the business proposed to be done by the partnership. For example: Will you be renting properties, flipping them, doing both?

5. What authority each of you will have to sign contracts, hire people, take loans and otherwise bind the partnership to obligations to outside parties. Do you have to agree on every item? Is there a certain amount you can spend before needing permission?

6. How long you plan to work in partnership before splitting up the properties and/or profits?

7. Can each of you do deals outside the partnership or will you do all deals together?

8. Will the partnership be one deal or multiple deals?

9. What if the partners cannot agree? How is a deadlock resolved?

10. What happens if a partner dies? Does his share go to his heirs or will the business pay his estate cash to buy out the shares?
(Note: This is usually done with life or key man insurance)

Putting a Real estate Investment Partnership Together

Usually you will need a written partnership agreement and you will also need an operating entity such as an LLC to limit your personal liability. Real Estate Investment Partners can create an LLC online quickly, but it's advised to use the help of an attorney in putting together a detailed operating agreement the first few times. It's a small price for real estate investors to pay for a piece of mind and protection of each member's interest.

Lastly, in my experience, it is important to distinguish real estate investment partnerships from pooled money from several investors when going into a real estate deal.

Go forth and prosper.