Who Should You Partner With?
Although it’s great to work with someone you like, it’s more important to choose someone reliable who shares your values and level of commitment. Make sure they are just as driven as you are and will be able to financially support themselves throughout the duration of the project. To find the right partner, thoroughly screen your applicants and have a contract ready for when you find the perfect fit!
Large upfront costs for an investing partnership or a club will likely dissuade those who aren’t committed to a long-term business venture. However, even with such high bars, you may still have to deal with partners who lose motivation and become lazy over time. To prevent this, establish a plan in advance for how you will handle unproductive partners.
How Do You Find Partners?
Many people you know may be interested in an investing partnership. You should spread the word that you are looking for partners, and hold your own presentations to show off what you want to achieve. Forming an investing partnership is quite common, so go to networking events and introduce yourself as someone who is willing to partner up.
The hard part is making it work and maintaining it long-term. You want to find a happy medium between having too few and too many partners; too few won’t provide enough capital for significant investments, but too many will create discord and make problems more difficult to manage in general.
Where Will You Invest Your Money?
Outline specific goals, and what each team member needs to do in order to achieve those targets. Choose which types of property you want to invest in, whether that’s land, commercial buildings, multiplexes, or single-family residences. There are also specialized markets that might be of interest, like industrial parks or mobile homes. You will also need to decide if your investing partnership will ever consider other types of properties down the line.
Consider Your Payout Structure
Revenue should be allocated based on how much each person has contributed. What are the minimum and maximum monthly amounts? You will need to take into account office expenses like making copies and filing fees, as well as things like general repairs. The agreement should list what is included and what isn’t.
It is important to have a meeting in order to discuss this in detail. Make sure that everyone understands the importance of having a clear structure and covering all potential scenarios, such as new people joining or leaving the group. Your property standards should be black and white so that there is no confusion about what is expected.
It’s a Full-Time Gig
In other words, put your ducks in a row from the very beginning. This will help avoid any legal or financial issues down the road. You’ll need to file paperwork, pay taxes, and speak with an accountant and lawyers. Once you have all of that figured out, then you can decide if you want to form a general investing partnership, LLC, or limited partnership. If you aren’t sure which one is best for your team, consult with a professional who can advise you further.