Looking for advice on Partnerships

[GMTM]

Just to give everyone a brief summary ......I'm 27 ......never owned my own home and just recently went to school and got my re license. There is so much I still have to learn but I'm excited about my future in the industry. I learn something new everyday. My fiance and I live in So Fla and have seen the market explode in our area. (which is one of the main reasons why I went to school) We have been talking about buying and selling fixer-uppers for quite some time but had NO idea where to start. Today I get a phone call from a family friend who wants to put together a business entity. He has 2 other investors who would provide funding, he wants me to be the "eyes and ears" ,and wants my fiance to head the renovations. We have a meeting on Wed to discuss it further. Everyone would have an even share in the profits. Any thoughts?

Like I said before I'm a newbie in the industry so my knowledge and experience is limited.

[ray_higdon]

Hello fellow South Floridian!

Partnerships can be the greatest thing in the world, or the bain of your existence. I have a partner that we work very well together and are just different enough to make the team work. I think that is great if someone is trusting you with their money to make the right decisions, that is the type of persona that will make you very successful in real estate. You want to think about a few things here. (1) What happens if one of the members wants to cashout? (2) What will be the terms of the partnership? Meaning, are they lending money and yuo do the work, or are they lending money, you do the work, and they get a split, not a percentage of interest? (3) Is the goal to acquire rental properties or land to hold or to flip as many houses as possible to build capital?

And if you are in Southwest Florida, you should come to our REIA meetings in Lee, Collier and Charlotte Counties (sorry, shameless plug)

[dealmaker]

I've been involved in a few different partnerships, some good, some not so good. But first:

A PARTNERSHIP is a legal entity, just like a person, sole proprietorship or a corporation. As such there are specific and legal stipulations for its operation. Also, as a LICENSED PROFESSIONAL in the RE industry, YOU are held to a HIGHER STANDARD than the others should things not go well with a third party from whom you buy, or to whom you sell.

That said, I would get a "Partnerships For Dummies" and any other related books and study up on them, BEFORE the next meeting. Also, DON'T sign any documents until YOUR attorney has reviewed them and you UNDERSTAND them.

dealmaker

[dplegacy]

Keep in mind there are all kinds of different partnerships. There are money partners, credit partners, equity partners, debt partners, etc. Before venturing into a partnership, be sure you know exactly what your role in the partnership will be. A partnership may not always be about cashflow. A partner may be looking for ways to reduce taxes and may not have interest in cashflow at all. This type of partner usually has a lot of money but very few ways to keep more of the money they earn. Real estate is one of the best ways in the world to "shelter" and reduce their total taxable income. On the other hand, some partnerships are completely about cashflow.
Bottom Line - just know your role.

I definitely agree with "dealmaker" also...have your attorney review your documents before signing them. It may be a temporary inconvenience up front but it could save you years of headache and thousands of dollars in the end. Protect yourself and your partnership!

[ZNICK]

Personally, I LOVE partnerships... kinda. :icon_verw

I enjoy partnering on a deal, but I wouldn't have a partner in my business except my wife. I have a lot of partners, I've done deals with 3 different people in the last month, but my business is MINE.

There's too many possibilities and opportunities for things to go wrong when you partner in a business. It might not be trouble today, tomorrow, or next month, but eventually, there's going to be problems.

Obviously this is simply my opinion, but keeping your business for yourself, and partnering on a "per deal" basis is the best way to go.

Z