The need for a Real Estate Investment Partner depends on a number of factors.
1. The type or size of a deal
The type of the deal and size has a big influence in this case. For example, if you are looking for a small property which you will buy and hold (No flipping), then experienced veterans of the real estate industry will tell you that a partner will only bring pain than anything else. To be honest, such small properties for just buying and holding do not require a partner who will only invest with you on the deal because the complications of having a partner for such small deals is not worth it.
On the other hand, if you are aiming at a multi-million dollar commercial deal, partnering up with other investors is a good idea. Actually, this is more like a “must” than a “choice”. If the deal is worth millions, there is no way you can gather the capital without help, unless you are Jeff of Amazon or Tim of Apple. Also, having several partners in such big deals will help distribute the risk so that if something goes wrong, everything is not on you.
2. Do you even need the partner?
Understand why you really need an investment partner. First of all, ask yourself, do you want an investment partner because you need one or do you need an investment partner because it is fancy and a lot of big real estate deals happen with investment partners?
If the answer is Yes to the former then go ahead. But if it is Yes for the latter then I must warn you, this fancy attempt can bring the worst out of you and your deal.
Also, ask yourself, is having a partner in this deal really worth the complication, legal work, documentation, etc.? If the answer is NO, stop looking for a partner right now and if you really want capital to get the deal closed, ask your friends and family who would act as family and friends instead of professional investors.
What I’m trying to say is – don’t go to the professional investors, not yet.
3. Returns from the deal
The size of the return amount is perhaps the most important factor to decide whether or not you need a or should get an investment partner.
For example, let’s say you want to buy a 2-family house in the countryside. And after the initial calculation, you are seeing only $300 per month cash flow. Now, in this state, would it be a good idea to take a partner in? Because adding another partner will mean you both will get only $150 per month.
However, if the situation is different and the cash flow or profit each month is big enough to share between two or more partners then you should definitely get involved with other investors.
Bottom Line
Moral of today’s blog post is – if you are really thinking of getting investment partners involved in a deal, make sure the split is worth the hassle and both you and your partner is benefitting from your deal. That’s all.
