Should You Take on a Partner?

Many investors, especially ones just starting out, feel compelled to take on a partner.

 

Sometimes it’s because they need money, so they turn to someone who’s wealthy enough to put money into the deal, whether as a downpayment, a loan for the entire purchase, or just to help with renovation costs.

 

Other times, an investor may very well have the ability to purchase a property but needs someone who has skills to renovate the property (like a contractor) or manage the property on an ongoing basis.

 

And others simply like the feeling of not being in it alone and having someone else to help bear the burden, risk, and work involved. There’s no single answer as to whether you should take on a partner in your real estate investing ventures.

 

Ideally, though, doing it on your own is probably the best route if at all possible. Taking on a partner can:

 

  • Make it more difficult to jump on investments you find, especially if your partner disagrees or tends to make decisions deliberately or slowly.

  • Create confusion and problems over how to handle renovations, tenancies, etc. — costing you time and money.

  • Cause financial disagreements and even legal issues.

  • Ruin friendships and family relations if it’s someone you’re close to.

  • Limit the amount of profit you make since you’ll likely be giving the partner a percentage of the profits.

 

So before you take on a partner, think about all the possible conflicts and costs you could incur, and weigh whether their involvement is necessary or worth having. And if you deem a partner necessary, expect that person to want a substantial percentage of returns or equity to make it worth their while.