Pitfalls and benefits of investing with a partner.


Real estate may seem like the route you want to want most to take when it comes to your investments. If you can provide the wherewithal and the liquid assets to invest on your own, then you can revel in the rewards of individual success. However, investing with a partner allows you to pool their resources to reduce risk and increase their leverage. Pooling resources enable you to have a larger down payment, stronger financial statements, or greater combined experience.

Why should I avoid investing with a partner?

The first disadvantage to investing with a partner is that, often, the money you spent is no longer considered a liquid investment. For instance, if you find yourself in a situation where you need the money that you spent two years ago, you are out of luck. As opposed to cash invested in the stock market, the money that you invested in the company is not easily sold or transferred.

Secondly, you need to realize you are but a partner, and as in any business, you are not legally allowed to make all of the decisions. Which third parties you partner with, what properties you purchase, how much cash you keep in your accounts to cover the monthly expenses, which properties are financed and which are not. The reason behind this is quite simple: acting fair as a partner will keep business fair. Ultimately, you wouldn’t be pleased if your partner lost all of your money simply because the general they made a wrong decision (or multiple bad decisions). The road goes both ways in partnerships, and this is certainly something to consider.

So, why is investing with a partner a good idea?

As with anything in life, there are disadvantages that pose significant risks, but never should you let those mentioned above, nor any other, reasons dissuade you from taking an investment leap.

First off, when dealing with a partner, each person brings different strengths and weaknesses to the partnership. One member of the team might be better with numbers while the other could be a big-picture thinker. Every person brings different strengths and weaknesses to a partnership. Understand what each individual is good at and put those skills to use to improve your business, while having an understanding of one another allows leveraging of your skills while offering assistance if necessary.

Secondly, when it comes to double-checking your work, having a partner could be substantial when it comes to deal analysis. Analyzing a property can be quite the undertaking; there are hundreds of considerations and tasks that must be painstakingly taken when searching for that first real estate deal. Having a partner to check your analysis greatly increases your odds of an accuracy, and therefore, save you from a potentially disastrous deal.

Also, real estate investing is not an easy task. Efficiently and fairly dividing responsibility can ensure that all partners can contribute to the business, and not become overwhelmed. Also, the importance of networking cannot be emphasized enough. Naturally, networking becomes much easier when you have more than one person spreading the word. Additionally, each partner already knows people who could end up playing a part in your business, either as team members, lenders, contractors, or clients.

Is a real estate investment partnership for you?

As with anything, there are ups and downs along with trials and tribulations. When taking a crucial financial step such as real estate investment, the risks are no different. Whether you have decided to take an investment leap with a partner, or by yourself, New Western is ready to help you get on your way.