Forming a real estate investment partnership can have some excellent benefits. An investing partner can open new possibilities that may not have otherwise been available and can make it easier to build up a profitable property portfolio in a shorter time frame.
Of course, there are times when investing as a partnership won’t be viable. For example, buying a smaller project or a single family home might be more profitable going it alone.
However, when you start looking at larger investments or multiple simultaneous projects, having an investment partner at the ready can help build momentum. Here are some of the key benefits to forming a real estate investment partnership:
Play to Individual Strengths and Combined Skills
A good partner should bring something to each investment deal that you don’t have. For example, you might have the experience and the knowledge to locate great property investments, while your partner has access to the capital required to complete the deal.
Your partner might have a knack for analysing each deal and completing the due diligence required, while your strengths might lean towards project management and controlling the budget.
Take the time to work out what strengths and strategic alliances each of you bring to the partnership and then build your property investment strategy to capitalise on those skills or abilities.
Capital Investment and Financing
Trying to launch a wealth creation strategy without enough cash to get started can be frustrating. A lack of money can also hinder your investing progress.
Your investing partner might have cash to contribute to the project. Alternatively, your partner may have the means to obtain financing that you may not qualify for.
Having a partner willing to put up the capital required to buy your next investment property makes it easier to access the properties you want to add to your portfolio.
Leverage gives you the ability to accelerate your wealth building success. Your investment partnership can provide an additional level of leverage for your investing goals that you may not have been able to access alone.
Investing as a partnership allows you to compound your efforts and combine your experience. The right amount of leverage can improve your profits and expand your real estate portfolio exponentially.
Split the Risk
When you invest on your own, you’re responsible for all the risk associated with your property portfolio. If you blow out your budget on a renovation project, you’re responsible for the shortfall in funds. If your rental property is vacant for an extended period of time, you’re responsible for covering the costs associated with holding the property on your own until your letting agent can locate a new tenant.
When you invest as a partnership, you effectively split the risks between you. Just as the profits you derive from your efforts are split, the risks associated with investing are also shared.
Managing a real estate investment portfolio on your own can be time consuming. As your portfolio grows, the time required to manage everything also increases.
Add the responsibility of managing a renovation project, or coordinating a new purchase, or arranging to sell one of your properties on top of your existing commitments and it’s easy to see where little things can go overlooked.
Depending on the partnership agreement you have in place, you can agree to share certain responsibilities in relation to your investments. One of you may be responsible for communicating with letting agents, conveyancers, surveyors, banks or lenders, and insurance companies. The other may be responsible for managing builders, tradespeople, and suppliers.
One aspect of many investment partnerships that is often overlooked is building strategic alliances. Your partner may have connections with professional letting agents or selling agents that can give you appraisal figures on property values or estimated rental income for your properties.
Your selling agents can expand your strategic alliances further by recommending trusted property conveyancing services and accountants. Your alliances may also include mortgage brokers or bank managers, or a team of reliable tradespeople.
Building a team of experts around your partnership can make it easier to avoid costly mistakes. You’ll find plenty of helpful resources to guide you on your investing journey on www.spencers.co.uk, including landlord’s insurance, mortgage consultants, conveyancing services and surveyors.
Finding a real estate investment partner to work with can be a great way to fast-track your goals. However, before you enter into any partnership agreement, work out exactly why you’re doing it, what you stand to gain from it, and whether you really need it or not.
Understand the type of entity or structure you’ll use to formalise your partnership agreement. Work out whether your investment strategy is best suited to a Limited Partnership or a Business Partnership.
Check that you both have common objectives for your investment strategies and draw up a formal agreement to consolidate the partnership. It’s also wise to itemise which partner will be responsible for what activities or duties in relation to your investments as part of your partnership agreement.
When you’re sure you’ve chosen the right partner for your real estate investment goals, it’s time to get started building your property portfolio.