REAL ESTATE PARTNERSHIP STRUCTURE 101: Do’s & Don’t’s
Partnerships can be a great way to pool resources and increase your chances of success in Real Estate Investing, but there are a few things you need to know before you get started. Almost every successful real estate investor has gotten where they are today by teaming up with other people to do bigger and better deals. As the African proverb goes, if you want to dash off and go fast, go alone, but if you want to truly go far, go together. The integral component of a successful real estate business lies in being aware of its incredible opportunities and utilizing them at the right time. You can easily Buy a house for the price of a car and be the owner of your own sweet home. At MY SMART COUSIN, we act as your most trustworthy Real Estate Investment coach who is determined to make you aware and teach you about real estate investment strategies. We help our Black & Brown folks mainly women to scale their finances and how they can Buy a house for the price of a car, not one but thousands. If you’re like most people, you probably think of real estate as a pretty safe investment. After all, everyone needs a place to live, and demand for housing always exceeds the supply, right? Well, it turns out that real estate can be a risky investment after all – especially if you don’t know what you’re doing. In this blog post, we’ll take a look at some of the do’s and dont’s of real estate partnerships. So whether you’re just starting in real estate or you’ve been investing for years, read on to learn more! WHAT IS A REAL ESTATE PARTNERSHIP STRUCTURE AND WHY WOULD YOU WANT ONE FOR YOUR BUSINESS? When two or more investors combine their capital and expertise to buy, develop, or lease property is known as a Real Estate partnership. Both the real estate entrepreneurs decide to work together in a professional environment and put their endless effort into accomplishing a single goal. For most real estate partnerships, the general partner takes on more responsibility and liability in exchange for a bigger share of profits. However, some only have passive investors or limited partners who don’t participate actively except when necessary One might wonder, why would he want a partnership in the real estate business? Well, there are many benefits. For starters, it’s easier than trying to do this on your own! You also get more exposure and an outside perspective which can help guide you in the right direction when making decisions about what kind of investments or properties will best suit both yourself as well as those who invest alongside them (i e.; partners). You’ve probably heard stories before where one investor seeks out another looking for financial backing but if that isn’t possible then maybe consider putting together some sort of group deal-like structure where everyone contributing something gets their desired outcome. THE 3 MOST COMMON ENTITY PARTNERSHIPS There are numerous ways through which Real Estate partnerships can be formed. Amongst them the most common types are – ° LLC or Limited Liability Company ° LLP or Limited Liability Partnership ° S-Corporation The benefits of owning a real estate partnership are twofold. First, the income or losses from your investment will be passed through to you on personal tax returns which eliminate any taxation at both corporate and private levels; second these partnerships offer extra-legal protection should there be claims against other assets not directly associated with this particular business venture–you’re protected by virtue being part. THE BENEFITS & DRAWBACKS OF REAL ESTATE PARTNERSHIP The one who lacks real estate knowledge or experience must go for the idea of a real estate partnership. If for nothing else, a truly great partnership can easily be the one thing new investors need to get started on the right foot. The best real estate partnerships act as a solid foundation for creating a great deal of balance between relationships, satisfaction, practicality, and essentials. Here are some of the biggest pros and cons of a partnering up to help ensure the one you create will be as powerful as possible: BENEFITS OF REAL ESTATE PARTNERSHIP ° A correct partner will always open the door for extra resources such as more capital, skills, network, and connections as well as professional expertise. ° The partnership provides a flexible distribution of profit & losses. ° For the one who wants to generate a passive source of income, a real estate partnership is beneficial for them. ° The personalities of each partner can combine to create a powerful presence in meetings with lenders or additional investors. ° When one partner is responsible for day-to-day responsibilities, they need help with longer-term strategies. The Real Estate Partners are essential in making sure that the project runs smoothly and equally share their workload so there can be no imbalance or sole focus on any single task at hand. DRAWBACKS OF REAL ESTATE PARTNERSHIP ° When two or more people invest in the same business, each person’s share is limited by how much they put into it. The benefits of investment – such as monthly income and profits from its sale – must be shared among all partners involved so that no one investor can reap too many rewards at once! ° An unclear partnership agreement may give rise to several disputes arising between partners in terms of delegating responsibilities and can turn your profitable investment into a loss. ° Different personalities of the partner give rise to versatile management& organization styles, which can be the cause of conflict between the partners. ° Sometimes capital differences also become one of the causes of disparity in the partners. ° Partnerships can get strained when one partner feels they are doing more than their fair share without getting an equal return. This could lead to tension between the two parties and even resentment toward each other, which may result in strain on relationships over time if not resolved professionally/amicably WHAT ARE THE THINGS TO CONSIDER WHEN SETTING UP A REAL ESTATE PARTNERSHIP STRUCTURE FOR YOUR