When And How You Should Form Real Estate Partnerships
The legal definition of a partnership is, "a legal relationship existing between two or more persons contractually associated as joint principals in a business." If you have time, money and knowledge, then you may not need to partner with anyone, but it is a rare person who cannot benefit from a little extra of all those commodities. Partnership agreements can be worked out in a number of ways to suit all persons concerned, but it is important to choose the right person. Make sure you choose a person who is totally honest, fair and highly motivated to work at his share of the agreement. If you are supplying the money, pick a partner who is good at keeping detailed records, is honest, experienced and willing to go after that sale in a motivated manner. If you are that person, you will need a partner who can supply the money and it will help if he is willing to leave most of the hard work to you. You can do without an interfering, critical person who questions your every move. Above all, don't partner with your best friend. Business and friendship often don't mix and the latter is worth more than money any day. After choosing a partner, everything must be worked out in detail and put into writing that should then be signed by both parties. Don't just think of all the good things here. Think in terms of worst-case scenario - it could happen and damage will be contained if all is worked out beforehand. LLC or Limited Liability Companies are good for partnerships. It's a great idea to ask an attorney to draft the agreement, but both parties should review it carefully. Don't allow poor communication, misunderstandings, or lack of documented procedures to ruin the partnership. Everyone involved should know what will happen and what to do if something goes wrong. Partnerships can have more than just two people in them. It's a good way to pool your resources and invest in a property (or several) that would be way too expensive for just two people. Sometimes one of the group may be appointed general manager. He might be the one with lots of knowledge but little money. He can be the one to do all the work, while the others keep their day jobs, but make sure he is trustworthy before you sign any agreement. So how do you go about getting into a real estate partnership? You may be able to access a local real estate investors club as a start. Networking is another option. Ask your local realtor if they know someone who is interested. Word gets around. Sometimes accountants or financial advisors have real estate contacts and sometimes they are advertised online. A word of warning. If you are the one with the money, be wary of scams and frauds. There are any number of sharks out there, just waiting for a bite. |
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