Partnerships: To be or not to be

The last thing we want to talk about in investor dilemma is partnerships.
The reason I bring up partnerships is this: Many people start investing in
real estate and they say, “You know what? I’m going to form a partnership
because I need some help.”
When you get into real estate, you are going to have many different types
of partnerships. Some projects are simply too big to handle alone, and that
is when you need to bring in additional staff and resources. Partnerships in
and of themselves are not good or bad. Let me explain. At least once a
week someone comes to my office looking for advice to form a
partnership. It may be a partnership between a father and a son. I often ask
why they are forming a partnership. A typical answer is, “Well, I want to
help my son out. I want to help him become successful.” Okay, fantastic!
But are you successful? Well if the father is not successful, it’s probably
not a smart partnership.
Many people form partnerships on the simple grounds of “Hey, this is my
buddy, and I would love to see him be successful with me.” The number
one thing you have to remember with partnerships is this: never drag
someone along with you. A partner is either going to walk side-by-side
with you or he/she shouldn’t come on the journey... period! Partners
shouldn’t ride on your back; they shouldn’t be dragged along. They
shouldn’t be part of the ride unless they are contributing side-by-side with
you. That’s difficult to understand when you are looking at partnerships,
especially when you bring in family. And you hear of this all the time; but
when it happens, partnerships fail.
Working with family is rarely a good thing. Everyone starts out with good
intentions. “Oh, we want to help out. We want to help our little brother
Johnny become responsible and to grow up a little bit.” That is theabsolutely worst reason to form a partnership. When you are searching for
a partner, you need someone who compliments your strengths and fills in
your weaknesses.
My current partnerships are based on competency. I have a partner by the
name of Trond. He fills in my weaknesses and compliments my strengths.
I do the same for him. I have another partner, Frantz. He is extremely
organized and proactive. Nothing can stop the guy... he is absolutely
dependable.
My partnerships have been fantastic; everybody contributes. They have all
been part of a fair partnership from the beginning. Understanding
partnerships is critical to you and your partner’s success. The only reason
why I bring up partnerships regarding investor dilemma is because in real
estate partnerships come into play all the time.
If you are going to form a partnership, be honest with yourself. Ask
yourself, “Is this person really going to help or am I dragging him/her
along?” What does each partner bring to the table? This is where you need
to look at the strengths and weaknesses of each partner and see if they
compliment each other. Also, remember the partnership needs to add
value, just like everything else in investing. In certain types of real estate
investing, like when working in large volume, you will need a partnership
to get off the ground.
Monday we will talk about what happens for when you have a bad partnership?