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Should You Have A Real Estate Investing Partner?

What is a Holding Company?

Real Estate Investing Requires Skills

Real estate investing is one of the most difficult fields to manage. It requires an extensive knowledge of the industry, the ability to accurately assess potential properties for purchase, and a well-honed fraud detector. This is why many amateurs choose to enter the real estate investing game with a partner, usually someone with more experience and a proven track record. But should you have a partner for real estate investing?

A business attorney can help you to foresee problems and head them off before they become a big, and often expensive, issue for your business. Establishing a relationship with a business attorney can be a good step in starting and growing a business. They can review what you are doing with your business and let you know about any legal ramifications you might not have thought about. You might want to consider a business attorney as one of your business advisers.

How well do you work with others?

Some people can flourish in teamwork situations, while others work best on their own. Which personality type fits you best? If you get frustrated with the decisions of others and have a hard time compromising, you probably shouldn't have a real estate investing partner. Such an arrangement would require that you defer to your partner's wishes occasionally, and you don't want to have a falling-out in the middle of an expensive transaction.

How much capital do you have available?

Real estate investing is not an inexpensive investment, which is the main reason individuals seek partners to fulfill their dreams. If you don't have much liquid capital, most of your investments will be financed through loans, which can lead to over-leveraging. A partner can significantly cut down on your up-front investment, while avoiding the pitfalls of financing. You won't have to pay that additional interest, which can be a blessing.

Do you have someone in mind?

It is rarely a good idea for you to seek a real estate investing partner if you don't know anyone in the industry. Partnering with someone you don't know is a recipe for disaster, and you never know when you're dealing with a predatory scam artist. If you have connections in the real estate industry, you can use that to your advantage, but don't align your money with someone you don't know.

What types of properties interest you?

Some real estate investments are conducive to partner arrangements, while others are not. Commercial investing, for example, is a great reason to get a partner because the transactions usually involve large amounts of money. If you're just looking at fixer-upper private homes or other small properties, however, a partner may significantly gouge your profits on each transaction. Furthermore, small properties are easier to handle on an individual basis.

Are you brand new to the game?

As mentioned above, real estate investing can be a high-risk gamble, which is why it helps to have someone in your corner who is experienced. This could involve seeking the counsel of a mentor or striking a deal with a partner; either way, you might fare better in the market with an experienced professional backing you up. If you're new to real estate and confused about the particulars, a partner can be a valuable asset.

Parting Thoughts

Equitable answers to these questions, and others, are rarely straightforward and seldom easy. To act in the best interests of the business, the shareholders, and clients, the prudent course of action is for partners to seek expert legal guidance and assistance in ending a partnership agreement.

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