Once you’ve decided a real estate partnership is the right investment opportunity for you, the next step is to make sure you do your research to find a good investment partner.
Far too often people jump into a real estate partnership without doing their research and due diligence about their investment partner. This can be a costly mistake that can lead to stress, conflict and at worst, a bad investment. Sometimes people partner with family members and end up bruising an otherwise healthy relationship, be aware of that situation before you jump into your real estate partnership too quickly. To save you time, energy and money, it’s critical that you take your time to properly vet potential partners so you enter the real estate partnership feeling confident about your decision.
To help you make an informed decision, and a wise investment, I’ve put together a quick list of character traits you should look for in a good investment partner.
A balanced skillset – A good partner should bring something new to the table that you are currently missing. In some cases, this may be access to capital, local real estate knowledge or a network of contacts. Whatever the case may be, make sure you clearly identify what you gain from the partnership and determine if the benefits outweigh the risks.
Similar financial goals – Before you decide who your investment partner should be, it’s important to have an honest conversation about each of your financial goals. This means you need to be clear about how much you are willing to invest to buy the property, how much you are willing to reinvest to renovate the property and how much money you want to earn. A key part of this conversation should also include your projected timeline so that both investment partners are on the same page. It’s so important to be aligned on the duration of the investment. Investors should be comfortable to lock their capital up for a few years. Real estate is not exactly what we would call a liquid investment.
Knowledge and experience – The right partner should have plenty of experience and knowledge in the real estate industry, particularly when it comes to the local real estate market you intend to operate in. A great way to figure this out, is to ask them about their track record and then do some research to verify that their story adds up. If there are any discrepancies this should be a red flag and a warning that they may not have the experience and knowledge you are looking for.
Honesty and integrity – With so much money on the line, it’s critical that you can trust your partner. This is particularly important if you intend to be a silent partner in the real estate partnership because you will be handing over the day-to-day decision making to them. The best way to figure this out is to conduct a reference check and reach out to previous partners or customers to get their honest opinion.
Reliable and good communication – Like any good relationship, whether its personal or professional, it’s important your investment partner is reliable and is clear with their communication. This means that they follow through on their commitments, pay their bills on time can be easily reached when needed. A simple way to test this is to see how quickly they respond to your text messages or emails and how thoroughly they answer any lingering questions you might have. If you aren’t getting the answers you want, chances are they aren’t the right investment partner for you.
If you have decided that a real estate partnership is the right investment choice for you, choosing the right investment partner is the biggest decision you’ll make so make sure you do your due diligence and find the right partner.
If you fail to take your time to find the right partner you can lose a lot of money, run into conflict and create unnecessary stress in your life.
Want to learn more? Reach out to us with any real estate investment questions and to learn more about real estate investing opportunities in Durham.
