There are a lot of benefits to having a real estate investing partner, but like most things in life, there are both disadvantages and advantages. With partnerships, you need to be aware of the potential drawbacks. Investing in Fresno real estate comes with many difficulties, which entrepreneurs sometimes try to power through on their own. But some of these problems could be easily solved by finding a business partner. So, quite a few property owners would jump at the first opportunity they get to partner up. However, you need to take a good look at your situation before making that decision. Partnerships like these aren’t easy to manage, and if your relationship with your partner were to fail, it may create more problems than it’s able to solve.
Among the potential drawbacks of a real estate investing partnership, there are three major disadvantages that every investor needs to reflect upon. These disadvantages include: sharing control of the business, a more difficult decision-making process, and a much higher risk of disagreement and miscommunication.
1. Sharing Control
The idea of sharing tasks may be a welcome one especially since the real estate investing business demands so much of your time and attention. However, when you share tasks, you also relinquish control over some of your daily operations, and that can be a challenge for some investors. In a partnership, you’ll need to go over a lot of things together. You’ll need to agree on the division of tasks and you’ll need to agree on the measures placed when one or more of those tasks aren’t completed to both partners’ satisfaction. If divisions and responsibilities are not clearly spelled out for each partner, important tasks could be left undone or overlooked altogether. Sharing control of an investing business requires a high level of coordination and communication for the partnership to thrive. This requires a strong commitment from each partner to fulfill their respective roles. Even when operations are running smoothly, sharing the responsibilities of a business can be a significant challenge and should be handled seriously.
2. More Difficult Decision-Making
On top of the complexities of a business with a partner, this new dynamic can make the decision-making process very complicated. Many investors enjoy the independence that comes with making important operational and financial decisions on their own. But in a partnership, both partners must be involved in every decision and they must come to an agreement on every issue of every aspect of the business. If both partners cannot reach an agreement, and neither is willing to compromise, the partnership could become dysfunctional. If that takes place, then the chances of continuing to run a successful real estate investing business together are small. Because of this, before bringing on a partner, it is important to first determine whether you can rely on your partner to work with and make important decisions. Always remember that “investing partner” is two words. You don’t just get an investment, you also have to deal with a partner.
3. Higher Risk of Disagreement and Miscommunication
While communication is always vital to the success of any successful real estate business, it takes the spotlight when there is a partner involved. Now, constant and effective communication within a partnership is absolutely essential in order to succeed. You now have a partner who shares both the tasks and the profits from your efforts. This means there will be a higher risk that disagreements and miscommunication will happen. All aspects of the agreement— from how profits will be shared to how much liability each partner will accept— must be addressed in detail even before entering into any kind of agreement. Among the biggest reasons behind a failed partnership is communicating poorly, thus resulting in disagreements. If an agreement cannot be reached, a disgruntled partner may quit, causing severe setbacks or even total failure.
There is a lot of successful real estate investing partnerships, but there are also quite a number of failed partnerships. If your partnership experiences any of these three significant drawbacks, it could potentially leave one or both of you feeling disappointed and your goals unattained. This is the reason why educating yourself and getting as much help as you can before bringing on a partner will give you that boost of confidence if and when you finally take that leap.
So, is bringing on an investing partner the right choice for you? At Real Property Management Platinum, we can help you assess your specific situation and offer the information and support you need to decide. We can give you valuable industry insight and guidance, helping you keep your investment goals on track no matter what decision you make. Feel free to contact us online or by phone at 559-324-9400 for more information.
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