Teamwork Makes the Dream Work: Build a Real Estate Partnership

Source: Photo by Cytonn Photography on Unsplash

Acquiring investment properties with partners is a great strategy to increase your investment returns. Having partners in your investment plans means pooling together expertise, funds, connections, and other resources to invest in larger properties like apartment complexes and multi-family homes—opportunities that you wouldn’t afford on your own.

But how do you have these types of partnerships in the real estate industry? Let’s see how you can get more people to join you in your investment journey.

Two Types of Partnerships

Partnerships can come from limited liability companies (LLCs), limited liability partnerships (LLPs), or S-Corps. In a broader sense, you can categorize your associations into the following types:

•  - Active Partnership: All partners are actively involved in the daily operations of the rental property business. They can play different roles in the structure, but it all boils down to allowing each partner to operate according to their strengths.
• - Passive Partnership: This structure includes one partner that does all the work and another providing the capital funds. The partners will have to agree on the profit split. A system like this is a great way to generate capital for more expensive real estate investments.

These partnership types will give you similar benefits, so it doesn’t matter which one you choose. What’s important is that you have a legal partnership with other individual investors.

Benefits of Real Estate Partnerships

The main benefits of being in a real estate investment partnership are as follows:

• - Ease in Raising Capital Funds: Having partnerships expands your ability to grow your portfolio. You’ll be able to earn a fortune from the little that you have, simply by collaborating with others.
• - Satisfaction of Contributing Your Expertise: Use your niche real estate investment skills to gain a percentage of the proceeds. You don’t have to know everything—you only have to contribute your specific strengths for the partnership to flourish.
• - Harnessing the Power of Teamwork: Not even a jack-of-all-trades investor knows everything about investing in real estate. Reap the benefits of productive teamwork that only comes from working with others, where responsibilities are also divided for your convenience.
• - Opportunity to Learn from Others: Real estate partnerships open up opportunities for you to learn from other industry players. This is crucial for beginner investors who have yet to understand how the industry works fully.

These are only four of the many benefits of having real estate partnerships, but should already show the value of having such teamwork in your investment journey.

How to Form Real Estate Partnerships

Now that you’re fully convinced that you need real estate partnerships, here are the steps to forming collaborations with other investors in the industry:

1. 1. Evaluate what you want. Before anything, you have to decide on what you want as a real estate investor. Only when you know what you need should you look for potential partners. What are your strengths? Weaknesses? Capabilities? Determine where you stand.
2. 2. Find a real estate partner. Find someone who can bring something new to the table. You want to have partners that meet a specific need or fill a void in your plan. Evaluate how those individuals align with your investment goals and do your due diligence before getting into any partnerships.
3. 3. Define your roles. Clarify who is expected to do what before signing anything. Who will be in charge of the finances? Who will handle marketing? Who will deal with property management? Make everything expectation clear so you know who to hold accountable when issues arise.
4. 4. Come up with a name. Choose a name for the legal entity you’re forming. The name should be unique, easy to spell, and easy to remember. Ensure that your name doesn’t infringe on any copyrights and trademarks, and see if you can register it as a domain name for websites.
5. 5. Set objectives and goals. Set common goals with your partner so you’re working on the same page. How much money should you raise? How will you diversify the portfolio? How long will you hold on to the property? What goals do you want to achieve within 3, 5, and 10 years?
6. 6. Draft a partnership agreement. Once everything is laid out, create a legal document that outlines the mission, goals, and details of the investment partnership. Ensure that you include the roles, responsibilities, and profit and loss allocations for each individual. The more elaborate the contract is, the better the teamwork will be.
7. 7. Get legal advice to make sure you’re complying with all SEC, state, and local laws and regulations.

Ultimately, your goal is to find other property investors that complement you well and are striving for the same goals you are. After all, that’s the definition of partnerships—having other people join you in achieving greater heights within the industry.

Partnering Up for Greater Investment Success

Once you’ve established a partnership with other investors, you’ll have to find properties for sale, proceed with the best opportunities, and start reaping the returns you expect to gain. When done properly, purchasing properties with partner investors will provide a lucrative and profitable source of active income for you to propel yourself in the real estate industry.

Are you looking for investment partners?

You can’t do it yourself—you need other individuals to complement and support your business venture. with our team of expert property managers for everything you need to succeed in the industry.