Partnerships are a Great Way to Fund Real Estate Investments
Finish this sentence: “I’d like to invest in real estate, but ____________.”
If you said, “I don’t have the money,” there is a solution.
Remember that while it takes money to invest in real estate, it doesn’t have to be your money. If you have a good deal, you can find the funding. One alternative is a simple partnership.
There are plenty of people who have money and would like to invest in real estate, but they might not know how and aren’t interested in taking the time to learn, or they want to invest in real estate but don’t want to take the time to do work involved in finding and structuring deals. If you take them a deal and present it well, they may be willing to use their cash and/or credit to fund it, and you split the profits.
Think you don’t know anyone who has enough money? Think again. You probably know dozens of people who have money in retirement accounts and who would like to see that money earning a higher yield than mutual funds provide. Many high-income professionals—doctors, lawyers, accountants, engineers—are looking for strong investments that will provide a level of long-term security their jobs do not.
If you’re shy about asking these people to invest in your project, use an indirect approach. Simply tell them you have a great deal, you’re looking for a partner, and if they know of anyone to please pass the name along. If they’re interested, they’ll ask questions—and if you have the right answers, you’ll have your funding.
The key to successful partnerships
The foundation of a successful partnership is a clear and comprehensive written agreement. No matter how well you know (or don’t know) your prospective partner, no matter how much you trust him or her, you need to clearly state in writing who is responsible for what, who has the authority to do what, and how the profits will be divided and paid.
Many people view contracts as what protects them when things go wrong. While that’s certainly a good reason to have written contracts, they are also a great tool to use to eliminate misunderstandings before they have a chance to happen.
For example, let’s say you have agreed to split the profits with your money partner 50-50. But you assume that you’re also splitting expenses and your partner thinks that he’ll get his share before the expenses are paid. Without a clear written agreement, you’re going to have a problem when the time comes to distribute the profits. By addressing the issue ahead of time, you’ve eliminated the potential for an argument over how the profits are calculated.
Savvy businesspeople expect and even prefer to work with clear contracts. If you’re concerned that insisting on a written agreement will make it look like you don’t trust the person (especially if this is a close friend or family member), let your attorney take the blame. Simply say, “I trust you and I know you trust me, but my attorney insists that we put all this in writing.” Good attorneys don’t mind being the scapegoat in situations like this, because it protects their clients—and that’s a key part of their job.
The first one is the hardest
Getting your first partner will likely be the most challenging, but once you do a deal and the partner makes a profit, it will be much easier to find other investors to work with. Someone who makes money by funding a deal with you is likely going to want to do that again—and he’ll probably brag to others about how smart he was to partner with you and some of those people will want to do the same thing. When your investors are making money, they’ll be happy to help you build a stable of funding sources.
Comments
Great information. This actually does work. While trying to figure out how to get some investment money on a project in real estate that I thought was a great idea, I mentioned it to someone simply to get feed back from them and they readily offered $100,000 to participate. Who'd of thought!
Posted by: Lisa | December 4, 2007 07:46 AM
I ma interested on the Real State Partnership. I have the knowledge and time to invest my time, if I found some one who is interested in investing their money and to share the profit. I have accounting degree as well as Real State education plus renovating and property management experience. But how do I get in contact with this investors? can you help? Thanks Almaz
Posted by: Almaz Mariam | December 8, 2007 05:40 PM
we are a group of lifestylist that belive in five kingdom keys princapal to a person lifestyle these keys princapal are
1.emotional:how to love and be love from a science base on a person needs-wants and desire this we can call the realtionship movement.2.sociology movement the systematic study of the development,structure interaction and collective behavior of human beings to affect and effect thier custom and pattern to cause a change in thier lifestyle. .3fincalcal movement to become intelligent with thier investment to grow wealth in the right area in thier life for their next of kin. 4.physical movement we must be in good health beaware what we put into our bodies also getting require excise for the body and the mind through the proper education and training finally spiritual movement knowing who your God is and alouding him to direct your path therefor we are seeking parternership to invest in real-estate so that we can use this as a way to fund our product we like to go into communtites that is run down and need to be revise these communties will become upscale and have a safe enviroment we will change people lives you can call me at [deleted] ask for cliff or email me at [deleted] I pray that you will aloud the Holy Ghost guide and direct you in this movement.
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Posted by: CLIFFORD HOUSTON | December 10, 2007 10:21 AM
Lisa,
thanks for your comment. You can miss out on a lot of great deals if you assume you know what others' investment decisions will be before you ask them -- and you have just proved that!
Posted by: Jackie | December 10, 2007 10:37 AM
Almaz,
You find investors by networking, networking, networking. Tell everybody you know what you want to do and that you're looking for investors. You might also want to participate in the Wealth Intelligence Academy's discussion board at http://board.wiacademy.com/
Posted by: Jackie | December 10, 2007 10:40 AM
My business partner and I are small developers, exploring the idea of getting help from outside investors, and/or partners, to complete a few of our bigger projects. My question isn't how to approach investors, but what to offer investors and/or partners. A preferred return? A percentage of the project? Or both? Any feedback would be appreciated!
Posted by: Timm | February 25, 2008 12:37 PM
All three of these approaches make sense and are valid. I would add that you should qualify any and all potential investors and once that is done, you should be in a position to determine what the investors desire and you can attempt to structure a deal that is win-win for both sides.
Kent Densley
Vice President, Land Development
Whitney Information Network, Inc.
Posted by: Kent Densley | February 25, 2008 03:31 PM