Plenty of real estate investors work as one-man or one-woman shops. Whether they’re wary of farming out too much responsibility to others, or protective of proprietary processes, or reticent to take on partners for any other reason, they prefer to work alone.
Some do well; some don’t. That’s life.
For various reasons, though, many aspiring real estate investors do choose to take on partners. We won’t waste time recounting the pros and cons of working with a real estate investing partner. For our purposes, we’ll assume that you’ve decided you need a partner to achieve your investing goals.
The first step in the process is finding the right partner. Here’s what you should look for.
Shared Goals and Values
First, confirm that any prospective partner’s investing goals align with your own. Florida real estate investor Ralph Serrano recommends sitting down with prospective partners for a frank discussion of your respective objectives. It’s critical that you and your eventual partner are on the same page.
A Strong Cash Position
Real estate investing usually involves some leverage, but fundamentals matter too. Always perform thorough financial due diligence on prospective partners, and avoid working with cash-poor investors without clear recourse.
An Attractive Borrower Profile
An attractive borrower profile means far more than, say, a good credit score. You’ll want to scrutinize prospective borrowers’ cash flow, their assets and liabilities, and their investing track record (if any; more on that in a moment). You can be certain that lenders will do the same.
Clear Understanding of Roles and Responsibilities
Don’t enter a real estate investing partnership without first hashing out the partners’ respective roles and responsibilities. If there’s any significant dispute around who’s responsible for what, proceed cautiously or bow out altogether.
Local Market Knowledge
Local market knowledge is essential to real estate investing success. Real estate expert Jamie Richardson recommends aggressive local networking; if your prospective partner isn’t familiar with the area, wait to hook up until they’ve proven themselves.
Demonstrated Business Acumen
Avoid partners who seem naive to the risks of real estate investing or unfamiliar with basic business practices. Real estate might not be rocket science, but that’s not to say street smarts have no place in the business.
A Sound Personal and Professional Reputation
Look for prospective partners whose reputations precede them. This is especially important if you’re new to the market or real estate investing in general. Working with individuals or entities with broad personal and professional networks could well open doors that would otherwise remain closed.
Take Your Time
Your choice of real estate investing partner is likely to be of immense consequence. Should the relationship founder, you may find yourself dealing with the aftermath for months or years to come. Better to take your time and get the decision right than to rush into a tie-up that could leave you exposed to unnecessary risk. After all, opportunity can be found in any real estate market; fear of missing out on anyone, in particular, shouldn’t compel you to act with undue haste.
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