Having a real estate investing partner can solve a lot of problems and it really has a lot of benefits but there are always two sides of the coin. With partnership comes a few potential drawbacks with it. Investing in McKinney real estate comes with many problems, which entrepreneurs try to solve on their own. But there are some problems that can be solved really fast if you brought in a business partner. So, quite a few property owners would jump at the first opportunity they get to partner up. However, you need to look at this from all angles, especially since partnerships like these can be tricky to manage. For example, if the relationship between you and your partner were to take a turn for the worse, you’d have a slew of new problems on your hands— probably more problems now than if you went at it alone.
Among the potential drawbacks of a real estate investing partnership, there are three major disadvantages that every investor needs to reflect upon. These disadvantages include: sharing control of the business, a more difficult decision-making process, and a much higher risk of disagreement and miscommunication.
1. Sharing Control
The idea of sharing tasks may seem good but the idea of sharing control can be a challenge for some investors. But it can’t be helped. If you want to divide and share the tasks that your real estate investing business demands, then you will also have to relinquish control over some of your daily operations. In a partnership, there are many things to iron out. You’ll have to come to an agreement about who will do which tasks, and what the plan is if those tasks aren’t completed to both partners’ satisfaction. If divisions and responsibilities are not clearly spelled out for each partner, important tasks could be left undone or overlooked altogether. Sharing control of an investing business requires a high level of coordination and communication for the partnership to be a success. This means that each partner should have a strong commitment to fulfilling their respective role. Even when circumstances are favorable, sharing the responsibilities of a business can be a significant challenge, one that should not be taken lightly.
2. More Difficult Decision-Making
Together with the intricacies of having a partnership, it also makes the decision-making process a lot more complicated. Many investors enjoy the independence that comes with making important operational and financial decisions on their own. But in a partnership, both partners must be involved in all the decisions for all the aspects of the business, and they must come to an agreement every time. If both partners cannot reach an agreement, and neither is willing to compromise, the partnership could become dysfunctional. If that were to happen, the chances of continuing to run a successful real estate investing business together are small. This explains why it’s important to first determine whether you can rely on your partner. You need to select someone you know you can work with, someone you can trust to make the important decisions, someone with the business’s intention at heart.
3. Higher Risk of Disagreement and Miscommunication
Communication has always been a vital part of any successful real estate investing business, but when it comes to a partnership, the stakes are a lot higher. Within a partnership, constant and effective communication is absolutely essential for success. With a partner sharing both the tasks and profits from the effort you put in, the risk that disagreements and miscommunication will occur is much higher. All aspects of the agreement— from how profits will be shared to how much liability each partner will accept— must be addressed in detail even before entering into any kind of agreement. Among the biggest reasons behind a failed partnership is communicating poorly, thus resulting in disagreements. If a remedy can’t be found, a disgruntled partner may quit, causing severe setbacks or even total failure.
There is a lot of successful real estate investing partnerships, but there are also quite a number of failed partnerships. If your partnership experiences any of these three significant drawbacks, it could potentially leave one or both of you feeling disappointed and your future unclear. This is the reason why the more information you have and the more help you get before making the decision of bringing on a partner, the more confident you will feel with that choice.
So, is bringing on an investing partner the right choice for you? At Real Property Management Hartford Metro/Greater New London, we can help you assess your specific situation and offer the information and support you need to decide. We can give you valuable industry insight and guidance, helping you keep your investment goals on track no matter what decision you make. If you want more information, don’t hesitate to contact us online or call us at 860-316-4388.
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