Partnerships work best when all participants know their roles and execute them as expected. It’s very important that both individuals are clear on what’s required of them so that everything runs smoothly. Let’s explore what makes a good real estate partner.
If someone tries to encroach on the other person’s duties it can lead to frustration on both sides. In the type of real estate partnership we’re discussing, one party acts as the money person while the other is the expert who executes everything to make the deal work.
The money person is solely responsible for financing the venture. If the money person is also going to be the ‘silent partner’ or a “hands-off investor” in the deal, there are specific characteristics of this type of partner. In this case, the money partner would not have anything to do with the hands-on aspect of the deal. This means they don’t try and contact tenants, drive by the property to see if it is being maintained well, order repairs or suggest using their own lawyer, repairman, etc. for any part of the deal.
Why would someone choose to be the “hands off money person”? The reason you choose this role in this type of investment is to reap the rewards of real estate investment without having to be involved in the process and day-to-day management. There cannot be two captains steering the ship, it just doesn’t work well that way. You have to be willing to put your trust in the expert, in this case, the “hands on management person” and their methods.
To be trusting of a partner when finances are involved is not a decision to make quickly. This level of trust doesn’t just miraculously develop. You need to sit down with the team, go over all of the pertinent details and get to know and feel comfortable with how things operate before making any decisions on investing. The deal needs to be a good fit for both parties and that can only be assessed after meeting and going over the aspects of how everything works. Taking time in the beginning to be very transparent on how things operate and what to expect helps to ensure you feel confident in who you are partnered with.
The partnership begins the minute you decide it’s a good fit to invest. You will never feel alone in any aspect of the deal and the team should help in getting all of the proper paperwork and documentation together to take the next steps. Even though you would be the one responsible for securing financing for the property, you need to see that your management team in the deal are with you every step of the way and help get everything in order and organized to make the process as streamlined as possible.
Just because one is the “hands off” partner, it does not mean you should be kept in the dark as to what is going on with your investment. A reliable and quality real estate investment company will make it a priority to keep their hands off partners informed. This typically is done via quarterly reports so you can see exactly what’s going on with the investment.
These summaries clearly depict the current status of the property so you are aware of all of the financials. Due to the long-term nature of this type of investment, quarterly reports are more than sufficient to provide insight as monthly fluctuations on real-estate values are nothing to get excited about if you are in it for the long-term. You should feel comfortable to any questions you may have about these reports so you feel fully informed about how your investment is performing.
Being the money person or silent partner in a real estate investment is ideal for someone who sees the benefits of real estate and is looking to grow long term wealth, but doesn’t have the skills or time to execute a deal like this on their own. Knowing the right property to invest in, the most efficient way to renovate for maximum value, how to bring in the right tenants and keeping everything in order is no small task. When you partner with a quality real estate investment firm you get all of the financial benefits while bypassing the items that you may find stressful or have no interest or experience with.
At the end of the day, only you know how comfortable you would be being a hands-off partner. For many, it brings a sigh of relief that they don’t have to manage something like that on their own. There is a tremendous amount of education and skill that goes into finding the right home, doing renovations and getting the right tenants in the unit that many people simply don’t have time for. However, if you’re the type that needs to be involved in every aspect of something than this type of deal ABSOLUTELY WILL NOT BE GOOD FOR YOU, nor the team involved in the deal.
Before you consider getting involved in real estate in this manner you need to know what your priorities are and what your strengths are. The point in working with an expert is to expedite things and benefit from their knowledge and experience. If you want to reap the financial rewards of real estate without having to learn a whole new skill set or deal with the day to day management, a partnership may be the ideal solution for you.
Have more questions about partnering to invest in real estate? Drop us a line at firstname.lastname@example.org