Partnering Up On Deals
By Paul Esajian on September 30, 2013
Regardless of how successful you are investing by yourself, there will come a time when partnering up on deals works in your favor. The scenario could also come on the flip-side, where you have a deal, but for a variety of reasons, you may need to find a partner to get the deal to closing. Accordingly, partnering up on deals may just save your business.
For every partnership success story, there are two opposite horror stories. There are a few main reasons for this. First, there is not enough communication up front. Even if you know the person you are partnering up with, you need to know their goals, objectives, strategies, timeframes and amount of work they will put in. It is amazing how many partnerships get off the ground without discussing what they think they can sell the property for. Not only for time consideration, but for lawsuit protection, you need to have a definitive plan for the property and how you plan to achieve it. Partnering up mitigates risk, as two minds are better than one.
Most fights are about time and money. You need to know who is responsible for what aspects of the deal and how you are going to pay for the project. If you are presented with a deal by a partner that simply wants a fee and a piece when it sells, you may be in for a surprise when they tell you they want to sell for more than you thought. If they don’t have money in the deal, they do not have the same urgency to get their money out and that could slow up the sales process. You cannot be detailed enough when it comes to tracking every expenditure and who is going to pay for it. Never pay for or ask for money if you are not willing to account for it.
If you are used to working without a partner, you may have gotten used to having nobody to answer to. With a partner, you need to adjust your mindset. If you say you are going to do something, you need to make sure it is handled. Too many times an issue will pop up and because you don’t know how to take care of it or are afraid to deal with the situation, the problem lingers and ends up costing more money. If you are not comfortable asking questions to your partner, you are probably working with the wrong person. Almost nothing should be out of bounds. If you are comfortable enough to discuss financials and hold each other’s income in your hands, you should be willing to ask away if something comes up.
The final piece is selling the property. Each side may have a realtor they have a relationship with or a price point that is stuck in their heads. Never be so nearsighted not to discuss this part of the process before you get started in the deal. If both sides are thousands of dollars off on what they perceive the value as or will only use their realtor, you have a real problem on your hands. If you decide to sell on your own, who is going to be doing the showings and what will the compensation be for it?
All of these potential pitfalls should be sorted out before you ever discuss buying a property. If done right, partnering up can change the way you do business and bring in revenue you would have never received. If done wrong, you could end up losing a friend, losing money or even end up in court. Sort out any items before you buy and stick to your agreements.