Before entering into any partnership you need to ask yourself what are the benefits of getting into business with a particular person(s). What are your goals for yourself and business and do they match the ones of your partner. Being realistic will help eliminate any emotions running high. You and your chosen partner need to be on the same page as in investing strategy, future growth and everything in-between. With that in mind, you will need to know what your both good at and enjoy doing as it relates to your business. If one is good with numbers and the other enjoys marketing you must know this before entering into a business relationship. It is not wise to get into business with someone who shares many of the same skill set as you because that will hinder your growth. You will find it hard to grow in your business. You need to find someone who can bring something to the table and vise-versa.
Depending on your short and long term goals and what your real estate niche is, you need to know the liquidity plans for your business. This applies to all areas of real estate but more so to long term investors who are holding on to a rental property portfolio. This is especially true when either one of the partners is married and has a family. It can get even more difficult if that is the case and many more variables. You both will need to establish a “what if” list for the future of your business. Answering questions as, what if one gets divorced, moves, declares bankruptcy, or dies and so on. Talking about these issues isn’t comfortable but are a must for the future success of your business. A well thought out plan will not only save you time but money in the future. When doing this process you don’t like the answers your getting or don’t feel comfortable being in a certain scenario with your potential partner, there is nothing wrong with bringing that up or deciding against partnering with them. Further on what I said earlier about knowing the future liquidity of the business you will need to discuss what will happen if someone wants to get bought out of the business if they decide to leave and how it’s going to be handled. This also applies to if you want to bring another partner on board. These are important “what if” questions that will take time to figure out but will be well worth the work.
While you are answering these questions you also will need to ask yourself what is the legal structure of your business. Are you investing under your personal names or a corporation? You will need to know this information. You pay taxes in real estate just like any other business or job. Depending on the type of legal structure you choose will also determine what kind of taxes you pay as well as how much taxes you pay. So talk to a trusted, well educated accountant and figure this information out early on.
At the end of the day when choosing the right partner you need to figure out if you both are compatible with each other. I have seen far too many people who were family and good friends that ended up not talking because business and money got in the way. Really take the time to prepare for this. Go over every little detail in the business before hand and your relationship will thank you.
I hope you enjoyed reading today’s blog and found it beneficial. As always, like, comment and share. For more information about some of the real estate results programs we offer visit Team Made Real Estate.
Manjit Rukhra, Your Results Coach to Real Estate and Entrepreneurship Excellence