You Complete Me - Elements of a Successful Partnership

My father and I are nearing our three year anniversary of our first flip purchase (October 2014). Over the past three years, we have learned A LOT! Starting today, we will post one tip per day for five consecutive days. We hope you find them useful to take your business to the next level, no matter which level that may be!

Today’s Tip: “Alone we can do so little; Together we can do so much.” -Helen Keller

Real estate is a tough business to do alone. Just try to think of one person in real estate that is successful without one single partnership. Tough, right? As real estate is a complex industry, one must first acknowledge that it is impossible to be an expert in every component. Second, one must be self aware of their strengths and weaknesses. Once identified, seek out the individual(s) who are experts in your areas of weakness. Meet with these individuals and confirm their goals and interests align with your own. And, lastly, make sure they are trustworthy. You can do this by asking for references, as well as starting with smaller “test” situations before diving head first.

Specifically to flipping (since that is our jam), we have read a lot of articles on BP that talk about partnering with a GC. A majority of these articles talk about providing the GC a 20-30% stipend of the rehab budget. This is not a partnership! Here is why:

1. (In our area) GCs get 20-30% of the rehab budget for any job they do, whether it is for a homeowner’s renovation, or building new construction. So why would anyone be motivated to make the same amount, with someone constantly asking them to do their job faster and for less?!?! (Hint: the question is rhetorical)
2. The essence of a partnership is all individuals involved win and lose together based on the invested equity. There are two types of equity: cash, or sweat. Typically, a GC’s equity is the latter. A GC has no equity in the business, if they are guaranteed a stipend. And, if they have no equity, they have nothing to lose. So again, why would they be motivated?!?! (Once again, it’s a rhetorical question!)

It may scare you to think giving up 50% of your profit is a lot. And, if you are only in it for the short term, you are right. If you are in it for the long term, and you want to make a business out of it than a 50-50 partnership is the right decision. By partnering with your GC, he/she will be equally motivated. And we are not are just talking about getting the work done quickly and within the budget; your GC will want the business to do well too! You might be thinking if the house is under budget and done quickly then the business will do well, but that is only part of it! The business also needs the support of other good contractors, and it needs inventory-houses! The more people you have looking for houses, the better your chance is at getting good deals. Never underestimate the power of your GC’s network!

For us, we are 50-50 partners, and we couldn’t be happier about this relationship! In our second year of business we were able to do our business full time without the need of supplemental income! Together, we decide how much we want to make each year, and we both work very hard to achieve our goal! Convinced? Now go out, find your partner and build your future together!