There are both pros and cons to bringing a partner into your residential real estate investing portfolio. Inviting a partner into your real estate investing activities can potentially add a lot of value and support. But sharing a business with a partner also means sharing control of the properties. To decide whether your real estate investing activities will benefit from adding a partner or not, it is important to first examine both the benefits and the drawbacks of doing so.
How would a partnership work?
Owning a rental property portfolio is a huge undertaking. Many entrepreneurs try to manage on their own. But it may not always be necessary to carry the full burden of investment property ownership alone. Bringing a real estate investing partner in can have a number of significant benefits.
The right partner may add a new level of expertise and experience to your business activities. A real estate investing partner could help you to be even more successful. A partner can also provide a second perspective when making important business decisions. A partner can also offer new insights and make suggestions that you perhaps wouldn’t have considered, or offer a new influx of funding thus expanding your options. Having another person there to offer support, perform important tasks, and shift some of the burden away from your shoulders can be an invaluable part of having a business partner.
The flip side of these benefits is also important to consider, however. Control over the business must be shared in a partnership. Some investors want to maintain control over all of their business and financial decisions and may find it difficult to relinquish at least partial control to another person. Duties and responsibilities have to be carefully defined, and constant communication is essential. This is because running a business with a partner can easily lead to duplication or neglect of some tasks, misunderstandings, and disagreements. Both making decisions and reaching agreement on many issues will likely become more complex, a process that can quickly break down unless both partners are willing to compromise and work together.
A real estate investing partnership needs to have balance.
It is important to examine the issue critically from multiple perspectives before bringing a partner on board. For example, one of the first things you should do is to take an honest inventory of your skills and that of your partner, then compare them to see whether your prospective partner has skills that you may lack. You should also ask your potential partner important questions, including their vision for the future of your business. Without a shared vision, it will be difficult to make a partnership work.
Funding is another important consideration. You’ll need to know things like:
- How revenue will be shared
- Whether or not you have the funds available to support a partner and
- Whether you think your business will generate enough revenue
Residential real estate investing partnerships can be very successful, leading to significant financial growth for both partners. They can also be a disaster, ending with both partners feeling frustrated, disappointed, or worse. Because each situation is different, the only person who can decide whether a partnership will work for you is you. But at the same time, the professionals at Real Property Management can help. We can provide insight and advice to property investors thinking about entering into a partnership agreement. Schedule a time to meet with us and we can provide insight for you.