Should You Have a Partner When Investing in Real Estate?
Real estate investments have been rapidly increasing in popularity over the past decade among all different types of investors. Along with the potential for a high Return of Investment (ROI), these investments often provide consistent and stable income in the form of monthly rent payments.
If you’re thinking of investing in real estate but want to lessen the amount of risk you add to your portfolio, you might want to look into making these investments with a partner. The following goes into detail about what this option entails and if it would be a good decision for your portfolio.
Should You Bring on a Partner for Real Estate Investments?
As is the case with many real estate investment opportunities, there are pros and cons associated with having a partner when making these investments. A real estate investor may choose to partner with another investor to add both support and value to their portfolio. Because of the ample responsibilities that investors have when managing their investment properties, sharing these responsibilities with a partner is a great way to lessen your burdens and ensure that your investments are properly managed.
Even though having a partner when investing in real estate can benefit your portfolio, this isn’t the best option for every investor or investment opportunity. Bringing on a partner may be the right move if you’re relatively inexperienced with real estate investing. The same is true if you have the money needed for an investment but don’t know the ins and outs of managing a rental property.
Partnering with someone when investing in real estate is particularly common for flipping houses and for investing in rental properties. If you’re looking to flip houses, it’s common for one partner to provide the funds and the other partner to do all the work. In this situation, each partner would receive 50% of the profits after flipping the property.
As for rental properties, partnerships can be much more complex and may involve various factors. The profit number at the conclusion of the partnership may not be as clear, which could make it difficult for someone to exit the partnership. If you want this type of deal to be successful, everything should be written down beforehand.
When you invest in rental properties, your partnership could be the same as the one mentioned previously for flipping houses. You could also choose to divide the work equally.
Benefits of Bringing a Partner to the Table
The exact benefits of bringing a partner to the table largely depend on what the partnership ends up looking like. However, a partner can provide you with:
- A broader network
- Ample amounts of experience
- More money and time
If you and your partner are both putting money towards real estate, having access to more funds may allow you to earn a higher return on your investment. Your investment opportunities might also be more extensive. Before choosing a partner for your real estate investments, keep in mind that each partner offers something different. Select a partner who will improve your portfolio and make it more likely that your real estate investments will be successful.
Potential Issues of Investing in Real Estate with a Partner
Even though having a partner for your real estate investments can be a boon to your portfolio, it may also create issues in certain situations. The primary issue associated with these partnerships is the potential for conflict to arise. If you and your partner have different management styles or personalities, disagreements may occur too often, which could put the entire partnership at risk.
It’s also common for disagreements to take place when one partner is far more involved in the investment than the other. If each partner’s responsibilities and duties aren’t well-defined in the partnership agreement, there may be confusion over how every facet of the investment should be handled.
If you want to have a partner when you invest in real estate, long-term success in this partnership is considerably more likely with effective teamwork and communication. Take your time to plan the partnership and write out all the details before signing the agreement. Performing your due diligence now will serve you well when it comes time to manage your investments.