If you are new to real estate investing, there are two problems you will often run into: lack of capital, and lack of experience. There are plenty of answers for both problems, but one of the most common is partnering with other investors. These can happen through multi-person LLCs, true legal partnerships, or joint venture agreements, and countless other structures. Partnerships don’t need to be legal. Partnering with good real estate lawyers, CPAs, and financial advisors may be beneficial too.
The Benefits of Partnerships: Every day, I get the phone call of “I want to start flipping, and I have $5,000.” This is not something most lenders can work with, but it doesn’t mean there are no options. One of the easiest problems for partnerships to solve is lack of capital. Your job as a new investor is to determine what value you can provide, and what problems you have. Four common problems that most investors have to solve:
- Lack of funds
- Lack of experience
- Lack of deals
- Lack of time
Your job is to figure out which of these you can solve, and which you need help with. Every partnership should be approached with the thought of “What problem can I solve for other investors?” What is your value proposition? In some partnerships, all partners contribute an equal amount of capital. In some, one partner contributes all of the capital, and all investors share the profits. The same can be true with experience. None of you have invested before, but you are a contractor, your partners are a real estate agent and an accountant. Your outside experience can help all of you stay on track more easily. Having additional investors can also help with verifying your decisions. It can also help prevent tunnel vision. It is much tougher for two to three investors together to all make non-logical decisions about a property that it is for one investor to do so. The biggest benefit of partnering with other people in the industry is to leverage their experience in conjunction with your own.
The Negatives of Partnerships: This doesn’t mean that partnerships don’t have their own problems. It can be tough to find partners that you trust; you will have a lot of time/effort/money invested in the project and are relying on the other person to complete their responsibilities as well. It can also be tough to handle other people’s opinions with so much money on the line. Most investors that I have met have an entrepreneur’s mindset. People with this mind set can struggle to consider other options and other opinions. Make sure to keep your mind open. The point of the partnership is to take advantage of everyone’s experience and to leverage additional ideas, so everyone can be more successful.
Steps to Starting Great Partnerships: First, figure out what value you can provide in a partnership. Then, figure out what values you are missing, or what problems you have. Meet local real estate professionals. Some of the best people to start with are: other investors, lawyers who specialize in real estate law, CPAs, real estate agents, lenders, and contractors. All of these people have the ability to help you, often with problems you may not even realize you have. The obvious question at this point is, “Where do I find these people?” Find local real estate groups online and go to their meetings. A common place to start is with Real Estate Investors Associations or REIAs. They are usually run by experienced real estate professionals and are often a great source of information and relationships. Tell the people you meet exactly what you are looking for. Start the conversation with what you do well, and then say what you are looking for. There’s likely someone in the room who has the opposite problem that you do. People will often direct you to the right people if they can. Learn as much as you can and ask for advice. There are often experienced real estate professionals in the room, and most people will be glad to tell you their story. The rest is up to you to sell your value to the right people, and make sure you come through on your end. If you’re not sure where to go from here, feel free to reach out to our Senior Business Development Coordinator, Stephen Ballard, at
SBallard@RCNCapital.com and he'll see how he can help!