Having a real estate investing partner can be a good thing. There really are a lot of benefits but on the other side of the coin, you have some potential drawbacks. Investing in Towson real estate comes with many difficulties, which entrepreneurs sometimes try to power through on their own. But there are a few problems that could be quickly remedied by bringing in a business partner. So, many property owners hurry and look for one. However, you need to give it some thought before making the decision. Partnerships like these can be quite a handful to manage, and if things between you and your partner get rough, you may be creating problems instead of reducing them.
Among the potential drawbacks of real estate investment partnerships, there are three major disadvantages that every investor needs to take into account. 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
There are times where the idea of sharing tasks with a partner seems like an answer. It is true that your real estate investing business demands so much from you, but sharing tasks means that you also have to relinquish control over some of your daily operations. Not everyone likes that; it can be a challenge for some investors. In a partnership, there are many things you’ll need to agree on, including how the tasks are shared. You’ll also need to have an uncomfortable conversation about what’s going to happen when those tasks are not 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 be successful. This demands a strong commitment from each partner to fulfill their respective roles. Even when operations are running smoothly, sharing the responsibilities of a business can be a significant challenge and should be handled seriously.
2. More Difficult Decision-Making
In addition to the complexities of having another person to share the business with, a partnership can also make the decision-making process quite 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 must come to an agreement on every issue of every aspect of the business. If both partners cannot reach an agreement, and neither is willing to compromise, the partnership could become dysfunctional. If that takes place, then the chances of continuing to run a successful real estate investing business together are small. Because of this, before bringing on a partner, it is important to first determine whether you can rely on your partner to work with and make important decisions. Always remember that “investing partner” is two words. You don’t just get an investment, you also have to deal with a partner.
3. Higher Risk of Disagreement and Miscommunication
Communication has always been crucial to running a successful real estate investing business, but with a partnership, its role is even greater. Constant and effective communication within a partnership has become absolutely essential. With a partner sharing both the tasks and profits from your hard work, there is a higher risk that disagreements and miscommunication will take place. All potential disagreements— from how profits will be shared to how much liability each partner will accept— must be resolved before entering into any kind of agreement. Among the biggest reasons behind a failed partnership are disagreements because of miscommunication. If a resolution can’t be reached, a disgruntled partner may quit, causing severe setbacks or even total failure.
While one can cite a lot of examples of successful real estate investing partnerships, there are also a vast number of failed partnerships. If your partnership experiences any of these three significant drawbacks, it could potentially leave one or both of you feeling disappointed and your objectives unmet. This is why educating yourself and asking the help of professionals is important when you are thinking about bringing on a partner. This will make you feel more confident when you do arrive at a decision.
At Real Property Management Metro, we can help you assess your specific situation and offer the information and support you need to figure out if bringing on an investing partner is the smart thing to do. We can offer valuable industry insight and guidance, making sure your investment goals are on track no matter what choice you make. Feel free to contact us online or by phone at 410-290-3285 for more information.
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