|
The Laurex Process: Strategy Development
Partnerships For Real Estate Investing
By Wendy Patton
Partnerships? Who me? Yes, you. They can be very profitable!
Partnerships can be a very lucrative decision for real estate investors.
A partnership's definition is "a legal relation existing between two or
more persons contractually associated as joint principals in a business
" - in real estate, partnerships can be used for many applications. If
you have time, knowledge or money, then you are a perfect candidate to
partner with someone with different qualifications. Say you have money,
but don't have the time or knowledge - there are many investors who have
time and knowledge, but don't have or they are out of MONEY! If you have
them all, money, time and knowledge, then you don't need to partner, but
most of us don't have them all, therefore, other solutions can give us
more flexibility for buying properties. Partnerships are just one
solution to this problem.
Let's talk about how a partnership can work in lease options. Say I find
a good home that would sell for a good profit on an option, but the
seller can't sell to me on an option. They must have their cash out of
the home, therefore, you have to pay cash or get a mortgage to make it
work for the seller. If you don't have cash and can't get it, why not
partner with someone who has the cash? Isn't half of a good profit
better than zero? And on the other hand, that someone with money, may
not have the time to find or manage a property, but they would like to
get in on real estate investing. In this case the person with the money
would be responsible for paying cash for the home (with a reasonable
interest rate on that money) or acquiring a mortgage for the home. The
partnership pays the mortgage payments with the rent received from the
home. When the tenant/buyer exercises their option - all profits are
split or rolled back into the company for more deals. Partnerships are
flexible and can be worked any way both partners want.
Picking a partner is important. Many good friendships end over business,
so be careful who you partner with. A good friend is not worth losing
over any amount of money. If you are the money person, you want to pick
someone that is aggressive, detailed on record keeping, honest, fair,
trustworthy and experienced. If you are the manager of the property you
want a partner who has money to work with, is honest, fair, easy-going
and most of all - hands off. They must trust you to do your part of the
partnership.
Create a legal partnership agreement. All details of how the partnership
will work, should be worked out, documented and signed prior to any
business transactions being started. Go through your plans together.
What do you want the partnership to do? What happens when things don't
go well? Go through worse case scenarios and make sure that all of your
solutions are worked out before they happen. What happens if the well
goes out and it will cost $3500 to fix it? What happens when the tenant
doesn't pay the rent and knows the system and gets the judge to extend
their time before eviction - and then damages the home severely? What
happens when you have to go to court? Who will represent you? Etc. I use
LLCs- Limited Liability Company's for my partnerships. Having an
attorney draft the operating agreement is a very good idea. Both my
partner and I review them. When we get all of the changes or corrections
made. We both sign 2 copies. One copy goes to me and one to my partner.
Talk to an attorney before you start a partnership. Poor communication
and lack of documented procedures is the number one reason why
partnerships have misunderstandings. Misunderstandings cause hurt, fear,
and disappointments, all of which bring partnerships to ruin.
I currently have 6 partners that either do the money end of the
partnership or they 'bird-dog' for me. Bird Dog partners are ones that
find the properties and many times manage them also. Many successful
investors have partnerships with multiple people. Partnerships create
synergy. With Synergy you can do more than you could by yourself. Here's
an example: by myself I might only be able to purchase 4 homes this
year. With a partner, I might be able to purchase 10 homes - more than
double what I can do myself - therefore, synergy - doing more than twice
as much together as you could do alone. So, why not partner?
Wendy Patton is widely recognized as one of the
most inspiring speakers on "Little or No Money Down" real estate
investing. Her real estate savvy and great depth of experience and
knowledge has helped her in orchestrating the most complete and easy to
follow, Lease/Option Program in circulation.
Wendy Patton now is a Licensed Real Estate Broker and Licensed Builder
with her own real estate company in Southeast Michigan called Majestic
Realty, LLC. Wendy Patton is the past President and Board Member of
D.O.L.L.A.R.S. Wendy has experience in land development, property
management, rehabs, foreclosures, but lease options are her favorite.
Now, with over 18 years of experience and hundred of transactions on
Lease/ Options, she is extremely excited about the idea of teaching
others and being given the opportunity to help others achieve the same
level of success.
Article Provided by:
Wendy Patton
Real Estate Broker & Builder |
