Should I Get a Partner for My Real Estate Business? 5 Tips for Creating a Successful Partnership
"No matter how brilliant your mind or strategy, if you're playing a solo game, you'll always lose out to a team." —Reid Hoffman founder of LinkedIn
Whether you are just starting your real estate business, or you are a successful real estate investor already, at some point you have probably considered whether or not you should get a partner. Investors tend to partner for a number of different reasons; whether it is scaling their business, increasing deal flow, buying more properties or taking on larger projects, partnerships allow people to accomplish more than they could do on their own. While partnering can help you take your business to the next level, anyone who has been a part of a failed partnership will also tell you how it can be detrimental to your business. Therefore it is extremely important to make sure you take the time to find the right partner to ensure continued success. Here are the top 5 tips for finding the right partner for your real estate business.
1. Alignment on Vision – The most important aspect of a successful partnership is making sure that you both align on vision. It is critical that you both share the same vision for not only the business itself but also for your own professional development. In order to do this, start by talking about your personal and professional goals and what you would each ultimately like to see for the vision and direction of the business. I encourage you to do this separately and compare notes when done. While you won't necessarily agree on every detail, you want to make sure that you have the same primary goals so you can create your roadmap to success.
2. Value – What value do you bring to the partnership? What are you good at and what is your partner good at? Is each member of the partnership bringing equal value? These are the 3 fundamental questions that you need to ask yourself first when considering a partnership. This will not only help you figure out if you should choose that person as a partner but also help structure each person’s stake in the company. One of the most common partnerships you see in real estate investing is a 50/50 split, but it is not always warranted. You want to ensure that each partner brings 50% of the value in this arrangement. While every situation is different, determining each person’s relative value is the key component to defining a successful partnership.
3. Clearly Defined Roles – Once you have figured out what each person’ value is, the next step to a successful partnership is to define each person’s roles. You’ll want to revisit your “vision and goals” for the business and figure out the best way to combine efforts to divide and conquer is. While it’s normal and sometimes important for there to be overlap in some roles, you’ll want to make sure that each other has 1 or 2 main roles that they focus the majority of their time and effort on and 1 or 2 supporting roles where they come together to make key decisions or to assist. Defining roles is not only important from a productivity standpoint, but it is also very important from a leadership and ownership standpoint as well. By taking responsibility for a particular role in the business, each partner is therefore held accountable for his or her role and is motivated to succeed.
4. Communication is Key - Probably the single most important component to long-lasting successful partnerships is open and honest communication. It is imperative to make it a point to do frequent check-ins with your partner on the state of affairs and ensure that you are still aligned with your vision for the business. Create a process where you review your goals on a weekly or monthly schedule to make sure that you are working towards a common goal. Additionally, it is very important to address any issues or concerns directly with your partner as soon as they arise. Creating and growing a business can be an emotional and stressful journey where you or your partner may make decisions or do something that you do not agree with. Rather than let it sit and fester, have an open discussion with your partner and let them know that you do not agree with the decision. By discussing the issues pragmatically, you can talk through it and understand the underlying reason why he or she made the decision they did. If your partnership is aligned, you will often find that you agree with their decision, or if not, you will be able to refine the partnership so that you do not find yourself in a similar position in the future.
5. Finding the Right Person - Arguably the most difficult part of a partnership is finding the right person to partner with. A business relationship is similar to other relationships in the sense that you will be spending a lot of time with the person, so partnering with someone you like is essential. Like any other relationship, you “want to date the person before you marry them.” My business partner and I had the opportunity to work together before deciding to partner. This was beneficial because we were able to understand how each other worked and what our style was. If you don’t have an opportunity to work together first, considering partnering on a deal or two first in order to learn how your potential partner works. This way if the first project does not work out, it will be easier to move on.
If you decide to get a partner for your business you want to make sure that you consider the following:
- Alignment of Goals and Vision
- Each partner brings unique but equal value
- Clearly define roles
- Make sure to communicate early and often
- Find the right person
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