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Going into real estate can be challenging especially if you lack people skills. Not everyone likes to speak one-on-one with new people and this is usually a requirement as a real estate investor. You can make or break a deal depending on the strength of your investment property knowledge. Finding a good partner is not easy to come by, but if you know the following tips for creating an investment property partnership it will help you succeed. There is something to be said about strength in numbers and creating a winning partnership is one of the fastest routes to growing your investment portfolio.
Investment Property Partnership Basics
When two people of different backgrounds come together, an explosion of creativity happens when both people are on the same page. Finding out 6 months into a partnership that your newly found partner does not approve of your direction can cause problems with your investments. The first step is to communicate. Fleshing out your strengths, weaknesses and fears that you have will put everything out on the table in the beginning. This brutal honesty will build a solid core for your investment property partnership.
Defining the finances and profit splits should be the next thing that is set in stone. Many partnerships end in bitter battles over profits because splitting profits came later in the partnership. Each partner should how much is required to invest and how much will be earned from that investment. It is also helpful to determine the percentages of expenses that each partner will be responsible for paying each month. It is a good idea to agree upon a certain percentage of monthly profits that are set aside for emergencies or future investments. Defining these elements in the beginning will save you from a lot of heartache and turmoil if your relationship turns south.
It should be decided immediately after profit percentages if property management will be required. This is considered a necessary expense for many investors especially those that live out of state. Putting all of the stress and worry on one partner can ruin any great partnership. Locating property mangement companies, reviewing rates and services should be the final element decided upon before the actual partnership agreement is put into writing.
Writing an Investment Property Partnership Agreement
Using the same lawyer to draft your partnership agreement will eliminate the risk of arguments that may arise over contract disputes. Consulting with an expert real estate attorney that can explain each section of your agreement in detail and add the decided upon elements will save a lot of time. Each partner that is a signatory to the partnership will fully understand each section and have his or her own input during the drafting of the agreement. This will ensure that each party knows the agreement inside and out. The legal fees for contract creation and consultation can be split equally between each partner making it a cost effective defense mechanism to protect each partner for all investment property dealings.