Who says long distance never works? What is a real estate partnership? A real estate partnership is a business partnership that you get into for the sake of investing with someone else. As a real estate investor, you could consider investing with one partner, or multiple partners, for the numerous benefits of real estate partnerships.
Related: What You Need to Know about Real Estate Partnerships
Why you should consider real estate partnerships
Real estate partnerships work great because they have the potential to bring together resources including capital, experience, knowledge, or even networking. Moreover, sometimes it’s beneficial solely because it’s convenient. Real estate investing is quite a challenging career to begin with. So, having a real estate partner to help you out can make life as an investor much easier when the tasks you have to do are divided upon more people.
Additionally, a real estate partnership can help decrease the overall risk of investing in real estate. When there’s less at stake from your end, the less risk you bear if something was to go wrong with your investment. Lastly, a real estate partnership will give you the opportunity to invest out-of-state without having to move or even commute all that often.
How to use a real estate investment partnership for long-distance real estate investing
It’s a simple concept. You’re interested in investing in a city that you cannot always access easily for one reason or the other. You know a real estate investor who lives or has access to that same city, and who also happens to be interested in partnering with you. You have a partnership agreement, and you choose to have a long-distance real estate partnership.
We’ll go through this step by step to make things easier.
Find a long-distance real estate partner
First of all, you need to find a partner who resides in the long-distance area you want to invest in. Do you already have connections in that area? Do you know other investors, or is the real estate scene in that city completely new to you? If you know people and the area, it’s easier to find a real estate partner. The real struggle comes along when you’re looking to invest in a city where you know few to no people. Begin by establishing yourself online as a real estate investor. There are multiple online resources where you can interact with and meet other like-minded investors. We also advise that you take a trip to the city you have in mind. Go to open house events and speak to landlords, investors, and realtors local to that area.
If that does not work out for you, consider friends, or fellow investors, whom you already know locally, and who would be interested in partnering with you and agreeing to move or commute to the city of choice. It’s a long shot, but you never know – you may get lucky.
Related: Long Distance Real Estate Investing Is Possible. Here’s How
Make sure to have a pre-agreement with your partner about your vision
Does your real estate partner understand that he/she’s going to be the one mainly managing the investment property? This step of the process is simply about letting your real estate partner, or future partner, know what you have in mind, and hear out what he/she has to say. Make sure you both understand what you are getting into and that you’re both on the same page. This will save you from miscommunication or misconceptions.
Plan, organize, apply
This is one of the most important stages of a real estate partnership. If you plan well, you’ll save significant time and effort, when it’s finally time to invest. Consider things like the neighborhood you’re interested in, and look at potential investment properties together to find one you both like. If you need help browsing through properties in any city nationwide, look no further than Mashvisor. Mashvisor’s investment analytical tools help investors obtain information on expected CoC return, cap rate, occupancy rate, and rental income, among other indicators. Once you’ve selected your desired city, plug it into Mashvisor. We’ll take care of the real estate market analysis for you from that point onwards.
Related: How to Start a Real Estate Business Through a Partnership
Agree on profits: what is it going to be?
What is it going to be? Who is taking what percentage of the profits? This is not your ordinary real estate partnership, so you don’t really have a balanced workload between the two (or more) real estate partners. This is why it’s very important to specify how much each partner will be profiting to dodge any conflicts that may arise because of money.
Consult with a legal and/or tax professional
Unless you (or your partner) know legal implications of the city you’re investing in, you should consult with someone who does. State laws and taxations differ from one place to the other, so make sure that you’re well informed to avoid any legal issues arising.
Make sure to sign a legally binding contract
The last thing you want from a real estate partnership is getting scammed or cheated. So, sign an agreement that includes all items that you and your real estate partner have agreed upon. This will help you steer away from scams or cheats that many investors fear when considering a real estate partnership.
What you need to be careful of in a real estate partnership
As any other endeavor, a real estate partnership (specifically one of long-distance) has its disadvantages. For one, you and your partner may get into a disagreement or argument that may be difficult to resolve over the phone or by e-mail. Furthermore, there may be an issue with the investment property that you feel like you need to be there for, but you can’t due to the distance. You are essentially leaving your partner to judge of many of the situations, calling most of the shots, and doing the property management in general. This may leave you feeling left out from the decision making process.
So, the question is: Do the advantages outweigh the costs of long-distance real estate partnerships?
All in all…
Real estate partnerships have the ability to change the real estate game. They’ll give you the opportunity to invest in new places, and you’ll gain experience from other real estate investors. If we have one piece of advice, it’s to always communicate with your real estate partner. Keep each other in the loop about your investment properties.
Related: How to Avoid Problems Arising from Real Estate Partnerships