Business owners in the real estate industry or anywhere else, need to play multiple roles to keep things running smoothly – they need to be the boss, the marketing professional, the accountant, the customer service executive and maybe, even the janitor. And if that weren’t enough, they also need to make sure there are enough funds to keep the business above water.
If it’s exhausting to just read through that list, it’s got to be pretty draining to be all that.
However, not every business owner bears these burdens alone – the most successful people in business enter into partnerships with people who share not just their workload, but their values and goals.
Partner to Win
Real estate investing, in particular, needs such partnerships for businesses to step up their game. When you partner with someone who understands your goals and complements your expertise, you have the perfect recipe for success. However, things could go south if that partner isn’t who you thought they were. In the real estate industry, the stakes are pretty high and you could wind up losing everything you built from the ground up.
Partnerships in real estate investing can make or break your career so it’s extremely important to be cautious when you choose partners, the kind of partnership you enter into and how you complement each other’s dreams and aspirations.
Discover five ways in which you can ensure your partnership is rock solid.
1. The Right Kind of Partner
More often than not, your real estate investing business needs a partner because you either don’t have the funds or the expertise to take on bigger projects. Broadly speaking, partnerships can be of two types and are often compared to dating someone versus marrying someone. You can choose between partnering with someone on a project-by-project basis or, you could bring them onboard as a business partner with prospects for continuous and long term engagement.
Private investors, who pump in just their cash for a piece of the pie, and project partners are like the people you date. You give the partnership a chance to see if both of you are aligned and compatible on everything. If yes, great but if not, then these partnerships give you the flexibility to cut your losses and move on to someone better.
On the other hand, business partnerships and private equity partnerships are relationships for the long haul. While business partners own a portion of your business and are part of your legal entity, private equity partners are people who bring in the money in exchange for partnership on long term deals. Both these partnerships need to be formed with caution because they can have longstanding repercussions.
2. Matching Goals, Dreams, and Ideals
Getting started with a new partner can be exciting and your mind may be racing with all that you’d be able to conquer together. But before you set out (think, get into legal arrangements) take time to check if your goals, dreams and ideals match. If you’re seeking a partner then they must know exactly what your core purpose is and that this isn’t something they can take lightly. People tend to gloss over this important step because they’ve known the other party for years, trust them and believe that everything will work out just fine. In reality, most partnerships run into trouble because the partners can’t agree with each other on some very fundamental issues.
A good practice would be to enlist all your major and minor goals, set specific timelines to achieve those goals and also to put down how you want to go about achieving those goals. If your prospective partner is still with you when you’re done explaining your dreams and ideals, then you have yourself a winner. But if you find that you’re pulling in the opposite directions, it’s time to move on.
3. Adding Value Through Variety
You may have found the biggest deal of the century but do you have the entire range of skills to see that project through? A partner who can bring to the table expertise that you lack will be the best thing that happened to your business. Just like your body doesn’t need two pairs of lungs or two brains, your business too has no use for someone who can do exactly what you can already do.
So, when you’re thinking of finding a partner, look for someone who has expertise that can complement yours, not mirror them. For that to happen, you need to be honest with yourself about what you can do and what you really need help with. It’s okay to not have the complete spectrum of skills that a business requires.
4. Communicating At Every Stage
Finding someone who shares your goals and has expertise that will mesh well with yours is not enough to build a successful partnership. If the two of you cannot communicate with each other clearly and constantly, then you’re going to face a different set of problems that could derail your enterprise. As partners, you will be spending most of your time working together and a lack of communication can create undue friction and misunderstandings.
Avoid such sticky situations by making it clear to your prospective partner that you intend to discuss every detail at the beginning, middle and the end of every project. Your partner and you should agree to having project debriefs at every stage. Besides operational details, you must also be able to freely express any issues you’re having so that problems can be nipped in the bud. In short, you both should trust each other enough to talk explicitly and you must like each other to talk all the time with each other.
5. Taking the Time to Test the Partnership
When you’re starting out with someone new, take the time to see if things actually work out between you. And a per-project partnership can be your best bet if you want to test the waters with someone. By signing up to work with someone new on just one or two projects, you can get a glimpse of their working style, check if they actually deliver the things they claimed they would; and most importantly, limit your losses if things go wrong and protect your ownership of the business.
Even when things do work out exactly as you hoped they would, it’s wise to do a few more projects together before you offer them a portion of your business. You must consider partnerships only after you’re a 100 percent sure that you and your partner can jointly elevate your business to the next level. Until then, just “date” them on a project-by-project basis.
Everything in Writing
Whatever kind of partnership you choose, put everything down in writing. And by everything we mean, details like who contributes what amount of money, how profits and losses are to be shared between you, who plays what role(s) in the business, who is responsible for what and so on.
If there are issues down the line, only written contracts will hold up in a court of law, and handshakes or verbal agreements will not be enough to save you from disaster. The first thing you need is a good attorney who can put together the right kind of legal entity for you and your partner, besides drawing up the operational agreement.
Weed Out Misfits
While it’s important to find a partner to expand and grow your real estate investing business, you must not rush into things. Partner with only those who are willing to wait for your combined hard work to pay off. Anybody who isn’t interested in building trust and a long term work relationship isn’t the right fit for you. Spot such people by their urgency to get things rolling immediately and their utter disinterest in accepting delayed gratification. Weed them out and keep looking for the right person to partner with.