If you are new to investing in Des Moines real estate, you may be on the hunt for a partner in crime. For many, having a business partner to invest in properties with adds an extra layer of comfort to a sometimes nerve-racking experience. On the other hand, if you are an experienced real estate investor that is looking to scale your business you may be in need of an extra person to help you manage daily operations. Regardless of the reason, you need to seriously consider these pros and cons of entering into a partnership with another Des Moines real estate investor before you sign anything.
Why Investors Like To Partner Up
There are many variables that can impact your business as a Des Moines real estate investor. Conditions like the state of the real estate market, your financial position, and your professional skills could all play a role in you deciding to enlist the help of a partner. For example, if you know everything there is to know about real estate and marketing real estate but know little to nothing about how to make home repairs, you may want to partner with somebody in the construction field to cut costs and increase the value of your properties. Another example would be if you have all of the money needed to purchase an investment property here in Des Moines, but have no idea how to go about purchasing, flipping, and selling the property for profit. The best real estate investment partnerships include people whose strengths and weaknesses complement one another rather than match one another.
Common Partnership Structures
Generally speaking, there are two common types of partnerships that real estate investors enter into.
Fifty-fifty: With this type of arrangement, both or all parties of the partnership will put up the same amount of equity. This is useful in establishing a strong sense of equality from the beginning.
Sweat Equity vs. Financial Equity: In this type of partnership, one party will invest the finances needed in order to purchase and repair the property while the other will put in the actual work to find, six, and sell the property.
The Pros Of Investor Partnerships
Obviously, there are a great many benefits to forming a partnership as a real estate investor or they wouldn’t be so common. Here are some of the best advantages you stand to gain when you partner up:
You can combine resources
Expanded professional network
The ability to divide and conquer
An additional set of eyes and perspective
Motivation and accountability
The Cons Of Investor Partnerships
On the other side of the coin, there are some drawbacks to partnerships that you also need to be made aware of. Consider these potential negatives that could impact your business should you choose to enlist a partner:
You have to split the profits.
Legal costs associated with formalizing your partnership can be as much as $10,000.
Personality clashes and differences in approach or opinion
The requirement to consult with another person resulting in less independence
Want To Start Investing In Des Moines Real Estate?
There’s so much to consider when looking at different partnership models and their benefits, as well as their drawbacks. If you would like help deciding if a partnership makes sense for you, give us a call today. We are dedicated to being your one-stop-shop for all things real estate investing in Des Moines.
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Liz and Chase