There are a lot of benefits to having a real estate investing partner, but like most things in life, there are both disadvantages and advantages. With partnerships, you need to be aware of the potential drawbacks. Investing in Austin real estate comes with many hurdles, which entrepreneurs try to go over by themselves. But a few of these problems can be quickly solved by getting a business partner. So, a lot of property owners rush and find one. However, you need to think this through. Partnerships in this industry can be tough to handle. If the relationship between you and your partner would sour, then you may be adding to your problems instead of solving them.
Among the potential drawbacks of a real estate investing partnership, there are three major disadvantages that every investor needs to think about. 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 be a welcome one especially since the real estate investing business demands so much of your time and attention. However, when you share tasks, you also relinquish control over some of your daily operations, and that can be a challenge for some investors. In a partnership, you’ll need to go over a lot of things together. You’ll need to agree on the division of tasks and you’ll need to agree on the measures placed when one or more of 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 of any good. This demands that each partner should have a strong commitment to fulfilling their respective role. Even when everything is going smoothly, sharing the responsibilities of a business can be a significant challenge and should be taken seriously.
2. More Difficult Decision-Making
On top of the intricacies of a shared business, a partnership will make the decision-making process harder. 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 every part of the business and they need to come to an agreement on virtually every issue that they come across. If both partners cannot reach an agreement, and neither is willing to compromise, the partnership could become dysfunctional. If that occurs, the chances of continuing to run a successful real estate investing business together are small. This is why you only get into a partnership after you have first determined whether you can rely on your partner to prioritize the interests of the business. You will need someone you can work with well and trust enough to make important decisions.
3. Higher Risk of Disagreement and Miscommunication
While communication has always been part of any successful endeavor, it takes center stage when you’re running a successful real estate investing business with a partner; constant and effective communication within a partnership is absolutely essential. You now have a partner who shares both the tasks and the profits from your efforts. This means there will be a higher risk that disagreements and miscommunication will happen. All possible points of contention— from how profits will be shared to how much liability each partner will accept must be tackled in detail before entering into any kind of agreement. One of the biggest reasons behind a failed partnership is poor communication that results in disagreement. If an agreement cannot be reached, a disgruntled partner may quit, causing severe setbacks or even total failure.
While there are many successful real estates investing partnerships, there are also quite a few dissolved partnerships. If your partnership experiences any of these three significant drawbacks, it could potentially leave one or both of you feeling disappointed and your business direction will have to change. This is why keeping yourself informed and getting help is important while you’re still mulling over the decision to bring on a partner. This will make you feel a lot better and more confident in whatever decision you arrive at.
At Real Property Management Alamo, we can help you assess your specific situation and offer the information and support you need to make the decision of bringing on an investing partner. We give valuable industry insight and guidance to help you keep your investment goals on track no matter what path you decide to go on. Contact us online or call us at 210-600-5672 to learn more.
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