{"id":15766,"date":"2021-09-27T16:12:01","date_gmt":"2021-09-27T23:12:01","guid":{"rendered":"https:\/\/www.rentecdirect.com\/blog\/?p=15766"},"modified":"2021-11-03T13:52:39","modified_gmt":"2021-11-03T20:52:39","slug":"building-an-investing-partnership","status":"publish","type":"post","link":"https:\/\/www.rentecdirect.com\/blog\/building-an-investing-partnership\/","title":{"rendered":"5 Tips for Building an Investing Partnership"},"content":{"rendered":"

\"investing<\/a><\/p>\n

Investing in real estate is a great way to earn passive income and quickly grow your wealth. Once a rental property starts to cash flow, you will start seeing significant returns. And if you choose to sell the property after a few years, you can <\/span>use the proceeds from the sale<\/span><\/a> via a 1031 exchange to invest in more real estate.\u00a0<\/span><\/p>\n

That being said, coming up with the initial capital to invest with can be difficult, especially in today\u2019s seller\u2019s market. Between <\/span>realtor fees<\/span><\/a>, closing costs, property taxes, home maintenance, and upkeep, the bill can quickly rack up.<\/span><\/p>\n

To save on costs, many people opt to invest with a partner, someone who can share the cost and responsibilities of owning an investment property while taking some of the burden off themselves.\u00a0<\/span><\/p>\n

But how can you build a successful partnership? And how can you tell if someone is a good partner for you? Read on for five tips on how to set up an investment relationship.<\/span><\/p>\n

1. Partnership entities<\/span><\/h2>\n

Legally, real estate partnerships can be created via a number of \u201cpass-through\u201d entities. Some of the most common are the Limited Liability Company (LLC), Limited Liability Partnership (LLP), and S-Corporation.\u00a0<\/span><\/p>\n

These entities provide legal protection and tax benefits for the partnership. For instance, if any claims arise against the business that the partnership conducts, the investors\u2019 other business assets or personal belongings outside of the partnership cannot be seized.\u00a0\u00a0<\/span><\/p>\n

2. Complementary skill sets<\/span><\/h2>\n

When looking for a partner, try to find someone with complementary skill sets to yours. Not everyone is good at everything. One person may be great on the administrative side of managing properties, such as bookkeeping, managing contracts, finding tenants, and knowing <\/span>when to buy or sell a property<\/span><\/a>. The other may be good at physical labor such as <\/span>home renovation<\/span><\/a>, making repairs, or maintaining the lawn.\u00a0<\/span><\/p>\n

The more skills a partnership collectively has, the more money can be saved in the long run. For instance, if neither of you knows how to install flooring, then you will have to pay an outside contractor to do it. Or if you both do not know how to negotiate with a seller whom you are trying to buy a home from, you\u2019ll have to hire a realtor.\u00a0<\/span><\/p>\n

3. Access to new resources<\/span><\/h2>\n

Try to find a partner who has access to resources you might not have, such as capital to avoid <\/span>property loans<\/span><\/a> or an extensive network of potential renters or buyers. Resources can include a network of contractors, interior decorators, architects (if you\u2019re <\/span>building a new home<\/span><\/a>), lenders, lawyers, or even access to real estate auctions.\u00a0<\/span><\/p>\n

A lot goes into investing in a property, and the more resources you have at your disposal, the better off you\u2019ll be.\u00a0<\/span><\/p>\n

4. Clearly defined roles<\/span><\/h2>\n

The key to any successful partnership is having clear expectations about each other\u2019s roles. Some things to think about as you are laying out responsibilities include:<\/span><\/p>\n