Should Your Real Estate Venture be a Partnership?

Why ask why?

If you are considering entering into a real estate partnership, this is the most important factor for you to consider. Why do I need a partner? According to US News, there should be a clear and specific benefit, whether financial or operational. The benefit is often due to a lack of capital but could also be due to inadequate experience or an unfamiliar field. If you cannot find a reason you do not need a partner.

Business is business

Once you have determined that there is a need for a partnership it is time to get down to business. Real estate partnerships, just like any business venture, should have an agreement that specifically states who is who, as well as their responsibilities. Although it need not be written by an attorney it should at least be reviewed by one. Often times this is overlooked or shrugged off, especially when friends or family get involved. This biggest mistake partners can make is disregarding the partnership agreement. There should be no room for dispute because everything should be determined before the partnership begins.

What is your type?

The partnership agreement should make very clear determinations about who does what. Just as with a business there are a variety of partnership types, or structures, to fit the needs of your partnership. Some of the more common types are a 50/50 split partnership, where everything is equally divided, or a real equity/ sweat equity partnership, where one provides the capital and another provides the industry experience.

If you are wondering whether to take on a partner for your next real estate venture, first seek out the benefit that partnership holds for you, if there is no benefit there is no need for the partnership. If you choose to enter the partnership remember that it is a business venture and it should be handled as such. This means having a through and specific plan that lays out what to do no matter what the partnership encounters.