Having a real estate investing partner has a lot of benefits but there are some potential drawbacks as well. Investing in Orlando real estate comes with many obstacles, which entrepreneurs sometimes try to get past on their own. But sometimes, the problem one encounters would be easily solved by bringing in a business partner. So, a number of property owners would be in a hurry to find one. However, you need to be mindful. Partnerships like these can be difficult to handle. If things don’t go well between you and your partner, you may be creating more problems instead.
Among the potential drawbacks of real estate investment partnerships, there are three major disadvantages that every investor needs to take into consideration. 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
Your real estate investing business demands so much of your time and energy and sometimes divvying up the tasks seems the best way to go. But the idea of sharing responsibility has a flip-side, it also means you’ll need to relinquish control over some of your daily operations. This poses a challenge for some investors. In a partnership, you’ll need to have a sit down with your partner about how the tasks are to be shared, and this should include what has to happen when 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 it to succeed. This calls for a strong commitment from each partner to fulfill their respective roles. Even when everything is going well, sharing the responsibilities of a business can be a significant challenge and should be given the proper amount of focus.
2. More Difficult Decision-Making
As part of the intricacies of navigating the partner-relationship, the added decision-maker can make the decision-making process more difficult. 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 decision and they have to come to an agreement on everything they deal with. If both partners cannot reach an agreement, and neither is willing to compromise, the partnership could become dysfunctional. If that were to occur, the chances of continuing to run a successful real estate investing business together are small. It is for this reason that it is important to first determine whether you can rely on your partner before bringing them on. You should be able to trust them to make the right decisions and do the work well. Remember that an investing partner is not just about receiving an investment but it also means receiving a partner.
3. Higher Risk of Disagreement and Miscommunication
While communication is always vital to the success of any successful real estate business, it takes the spotlight when there is a partner involved. Now, constant and effective communication within a partnership is absolutely essential in order to succeed. With a partner sharing both the tasks and profits from the work you put in, there will now be a much higher risk that disagreements and miscommunication will come about. All issues— from how profits will be shared to how much liability each partner will accept— must be ironed out in detail before entering into any kind of agreement. One of the biggest reasons behind a failed partnership is disagreements stemming from poor communication. And if it cannot be resolved, a disgruntled partner may quit, causing severe setbacks or even total failure.
In Conclusion
There are a number of successful real estate investing partnerships, but there are also many partnerships that did not last. If your partnership experiences any of these three significant drawbacks, it could potentially leave one or both of you feeling disappointed and your goals unattained. This is the reason why educating yourself and getting as much help as you can before bringing on a partner will give you that boost of confidence if and when you finally take that leap.
So, is bringing on an investing partner the right path for your business? At Real Property Management Freedom, we can help you assess your specific situation and offer the information and support you need to find out the answer. We can provide valuable industry insight and guidance, ensuring that you keep your investment goals on track no matter what path you take. For more information, please contact us online or give us a ring at 813-867-2667.
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