A real estate investing partnership is something that is becoming more and more popular in the world of real estate. This is simply due to the fact that the real estate investing partnership can offer various benefits to both beginner real estate investors as well as experienced real estate investors. However, there are not only pros when it comes to buying an investment property with a real estate partner. There are cons as well. For this very reason, we will explore what both the advantages and disadvantages are when engaging in a real estate investing partnership. But first, let’s explore what a real estate investing partnership actually is.
#1 What Is a Real Estate Investing Partnership?
We already mentioned that entering a real estate investing partnership is a preferred investment strategy by many new real estate investors, but not only. Many of the most successful real estate investors are also attracted to this opportunity. Investing in real estate this way implies that you are buying an investment property together with another real estate investor, or the so-called, real estate partner.
When learning how to invest in real estate and how to make money in real estate with a partner, there are a few points to consider. First of all, you should choose a person who you trust and are sure would bring advantages rather than disadvantages to your real estate investments. Secondly, the real estate investing partners should carefully divide the workload and the responsibilities. Additionally, the real estate investing partners should allocate the profits and costs and establish the primary and following financial contribution. For instance, the partners might decide to equally engage in the process. They can conduct real estate market analysis and investment property analysis together. They can also choose the rental property, prepare and manage it, while they all put the effort in the process. Nevertheless, it can also be the case that one of the partners invests more financial assets and prefers to invest less time and energy.
After knowing how to invest in real estate and how to make money in real estate with a partner, it is time to explore the pluses and minuses of entering a real estate investing partnership.
#2 Real Estate Investing Partnership: Pros
Let’s start with the benefits of a real estate investing partnership. There are quite a few points to discuss here.
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Investing in Real Estate with Little or No Money
OK, that is one of the major advantages of purchasing real estate investments with partners. Imagine you are one of the new real estate investors. It is rarely the case that you would have enough money to be buying your first rental property independently. Therefore, you would most likely start searching for ways of investing in real estate with little or no money. Well, engaging in a partnership is probably the best way to do so. This is due to the fact that you will join a unit with another investor. Thus, your financial assets will grow. Even if you have the means and you are one of the experienced real estate investors in the field, by combining powers, you can invest in the best properties there are.
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Low Risk Real Estate Investing
Another benefit is the lower risk when investing in properties. That is something extremely useful for beginner real estate investors who are not yet fully knowledgeable and experienced in the field. The lowered risk comes from the fact that the costs and responsibilities are shared among all parties involved. This way, you can proceed with buying your first investment property without facing the fear of failing miserably.
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Dividing the Workload
Besides sharing the costs and the risk of the investment, real estate partners also usually share the workload. This is valuable in many ways. First of all, when performing real estate market analysis and investment property analysis, for instance, there are tons of data for the US market. The more people work on the research, the more properties you will be able to analyze. Thus, it will be easier to find the most profitable investments. Moreover, “two heads are better than one.” This means that you will be able to reflect on each other’s work and come to solutions together. Typically, taking different perspectives into account can be extremely beneficial, as is the case in real estate investing.
#3 Real Estate Investing Partnership: Cons
Sure enough, there are not only beneficial sides to entering a real estate investing partnership, there are some disadvantages as well.
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Shared Profits
Along with sharing the costs and the risk involved, the real estate partners should also divide the profits. This might be considered a con. This is due to the fact that you might end up receiving less than you would have liked to. Moreover, establishing a way of dividing the generated income might lead to disagreement between the parties. For instance, the investors may decide to allocate the profits based on the financial assets given for the property. Thus, a house investor who has worked tons might end up receiving less money due to the small initial investment. That is not very nice, now, is it?
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Failed Real Estate Investing Partnership
Even the most successful real estate investors can fail at creating and maintaining a partnership. The latter might occur due to insufficient communication, for example. Another reason might be the lack of involvement from one of the parties. The lack of consensus between the house investors might also be a factor.
Whatever the reason, the truth is that once the real estate investing partnership hits rock bottom, things become harder. You should try and fix the problem. Another exit from the situation is to establish the division of investment properties and all the linked profits, costs, responsibilities, etc. However, as all partners are mutually involved in the process of owning and managing the property and coming to decisions regarding the investment together, this negative of real estate investing partnership should not be your concern.
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