Active partners or go solo? - Posted by Todd

Real Estate Investing Real Estate Financing
#1

Posted by Colleen-WA on March 13, 2002 at 22:27:30:

I am a bit like you. I have limited time and have found a friend that has similar interests. We have a casual working relationship at this time and are learning together. We have not done a deal together (or separately) yet. The advantage is our somewhat different skills and interests and available time. She gets out of work at 3 so can do some business hours activity that I cannot do.
My opinion about partners, whether it be business or marraige, is that the best ones get together due to common interests but stay together becuase they know how to deal with differences. AND, I plan to have an exit strategy agreed up front if I and my casual working partner make this more formal. We will, at least, have an agreement for each deal as we go so that if we keep any and then split it is all agreed while we were feeling good about each other.

#2

Active partners or go solo? - Posted by Todd

Posted by Todd on March 13, 2002 at 22:07:57:

I have 2 co-workers who share my interest in getting involved in REI. We have all been working recently on our education (Carleton sheets, books, this forum, etc…) and discuss on our lunch breaks how we are going to go about taking our first step from education to action. What I am trying to decide is when it comes to action whether it will be better to try to attack it as partners, or if it would be best to go it alone. We are all approximately the same age, have the same amount of time/money to invest (5-10 hours/week, not broke but not a load of startup cash), and share most of the same long-term and financial goals.

I know that a lot of people put together a cash partner for some deals, but I am hoping to hear from people who have tried or are still in “active” partnerships (regardless of legal entity, not including spouses) and how it has worked out.

The way I see it…

PROS

  • Motivate each other with education and goal-setting
  • Share in the startup and on-going marketing costs
  • Carry only a portion of the financial risk of any one deal
  • Diverse skills to “bring to the game” towards a common goal.

CONS

  • Disagreement on how to structure a deal or whether to make it at all.
  • “Bitterness” if one person seemed to not be pulling their fair share in some aspect. (especially financial)
  • Less payoff on each deal, need a larger volume of deals to meet individual financial goals.

Obviously I would try to cover as much of the potential downfalls as possible in a partnership agreement or corporate bylaws…

Any comments on this issue or links to previous discussions are much appreciated! (I have learned much from the discussions on the best legal entity, but didn’t really find anything in the archives on making the decision to work as a team or work alone.)

#3

Solo! - Posted by Kim (FL)

Posted by Kim (FL) on March 15, 2002 at 06:57:00:

I say NO partners for your situation. I think that you have a great situation to be a mentor and have two mentors. I think it should kind of end there. Use them to motivate you, advise you, and help with ideas. But - to actually make it I think you should do it on your own. First and foremost, the payoff at each deal is a big issue. Secondly - long term goals will change and you don’t want to feel like you need to “carry them” through if your goals are larger than their goals. Thirdly - if you screw up (not that you will but even a bold investor realizes that they may be overlooking things) you don’t want it to be your decision to move forward so you’ll all be much more hesitant than you should be.

I have two friends that formed a corp for REI and they’ve been looking at houses for MONTHS now. They have still not been able to make a decision together and they haven’t done a deal yet. I say, in this business, partners can hold you back more than push you forward. Just my opinion.

Kim (FL)

#4

Re: Active partners or go solo? - Posted by RickCA

Posted by RickCA on March 14, 2002 at 21:27:20:

  • “Bitterness” if one person seemed to not be pulling their fair share in some aspect. (especially financial)-

The biggest problem is usually not financial, but partners get upset when they don’t see another putting in as much “time” as they are. The dollars are easy to put in writing, but the intangibles are the hard part…

I have had partners before and now prefer to work solo. I like the idea of putting together a partnerhsip for a specific project and when its done, its done. No reason you cant do it again for the next job, but you are never locked into something for the long haul. This is basically balancing the books and splitting your cash after every job.

Good luck

#5

Re: Active partners or go solo? - Posted by Ned - IL

Posted by Ned - IL on March 14, 2002 at 08:11:35:

Be very careful. Partners can change their minds and interests at the drop of a hat. Make sure you have some sort of legal written agreement from the beginning in case someone wants out or you have to disband the entire partnership. I have been ‘burned’ by a partnership with a co-worker I knew a long time before (not in the REI business). Personally, I would never go into a partnership again! Good luck…