Should You Consider A Partnership?

A common method of buying real estate is in partnership with another investor.  First, let's look at the reasons you may want to consider including a partner in your real estate investment program.

1. Your investment capital is small (or non-existent).
2. Your credit is such that mortgage qualification is a problem.
3. You can own a much larger property if two or more investors pool their capital.
  

Let's discuss the last point more thoroughly.  There are several advantages of owning a larger investment property"
1. Your "per-unit" operating expenses are reduced.  It may cost $100 a month for lawn care on a 10 unit building but only $150 a month on a 20 unit building.
2. Your vacancy "risk" is reduced.  Take rental apartments as an example.   If you own a duplex (2 units) and one is vacant, you are 50% vacant.  Half of your potential income is gone.  If you own a 20 unit building and have one vacant unit, you are only 5% vacant.
3.  Larger properties allow you the opportunity of having management to handle the operation of the property if your time is limited or you do not want to become involved.

"OK, my best friend Charlie has some money and would like to become a partner with me.  What next?"

First of all, think it over carefully.  How badly do you want to keep Charlie as your best friend?  Quite frequently, partners tend to disagree.   ("I'm doing all the work and Charlie is getting most of the profit!").   I'm not saying that you and Charlie will disagree, but I've learned from experience that some of the best priced properties to come on the market are a result of two partners who disagree and want to dissolve the partnership.

How do you solve this problem?  One way is to form a "limited partnership".  In a limited partnership, you are in sole control of the investment.  The other partner(s) are strictly investors.  They have no say in the operation of the property.  You are the "general partner" and have the responsibility of making all financial decisions and in managing the property.  You, of course, collect a monthly management fee for your services.  Forming a limited partnership also gives you the opportunity of owning a part of the project without investing any of your own money!  How?  Your "down payment" is the expertise you have in locating, financially structuring and buying the property.

You need to check with your legal counsel for advise in setting up this type of a transaction.

There is a lot more to be learned in joint venturing property investments.   Many are covered in the complete real estate investment course offered here.   For example, we will show you how your can become a full partner in a real estate investment, without putting any money of your own!  
Just click on the link below to learn more.

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