8 Questions to Ask a Potential Real Estate Investing Partner

Choosing the right real estate investing partner is often more complicated than you'd think — but it doesn't have to be.
real estate investing partner

Investing in real estate is both lucrative and challenging. For this reason, many people choose someone who shares the same vision and offers a complementary skillset as their real estate investing partner.

The ideal partnership will take your business to new heights. You may even achieve a level of success that wasn’t possible on your own. On the other end of the spectrum, a failed partnership can lead to legal feuds and wasted money. Picking the right real estate investing partner is crucial and can easily make or break your vision. 

In addition to selecting a reliable real estate agent, choosing a real estate investing partner is one of the most important decisions you will make. Here are eight questions to ask potential candidates to help you get it right the first time.

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Are You in a Good Position Financially?

This is a question that goes far beyond a person’s salary. The answer should encompass every aspect of financial health, including debts owed and other active investment commitments. The right person will be open and honest during this type of conversation, providing a clear picture of their financial standing. Be wary of anyone who seems guarded or private in this discussion. 

Do We Share the Same Values and Vision?

Your values make up who you are and determine how you embrace success or navigate challenges. Honesty, respect, and integrity are all examples of values that help a person develop a moral compass. Ask your potential real estate investing partner about the values they find most important.

Be sure to discuss your vision for the partnership and future endeavors. You should be on the same page regarding both short-term and long-term goals. For example, are you open to exploring FSBO listings or would you rather stick to investments that are backed by a real estate agent? Is the goal to create a lucrative business to put on autopilot, or do you want to actively and continually grow the portfolio? 

Many disagreements arise from real estate investing partners who don’t share the same vision for the business.

What Are Your Expectations?

Realistic expectations are essential when it comes to real estate investments. Many people make the mistake of assuming they’ll achieve maximal results with minimal effort and small amounts of capital. 

Although real estate can provide passive income in some situations, it usually takes time and effort to get there, not to mention a substantial initial investment. Discuss the expectations your potential real estate investing partner has and ensure you’re on the same page, both grounded in reality.

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How Do You Handle Stress and Pressure?

Real estate is a high-stakes business where things can quickly go awry. Even the smoothest transactions are filled with pressure and stress. It’s important to know how someone handles these types of situations. Ask your potential real estate investing partner for an example of a time they navigated intense stress or scrutiny. You may even want to provide a hypothetical scenario as a prompt to find out how they would navigate various types of situations.

What Are Your Unique Strengths?

Everyone brings their own experience and strengths to the table. Hone in on what your potential real estate investing partner can offer. Do they have proven success in the commercial space? Are they drawn to multifamily housing in large metropolitan cities? Perhaps they’re an expert in flipping houses. Make sure you have a full understanding of what they have to offer and how you can work together to achieve big goals.

How Would You Prefer Profits Be Divided?

Although many partnerships are 50-50, this isn’t always the case, and it doesn’t have to be if you agree on a different arrangement. Ask your potential real estate investing partner how they’d like profits to be divided. Will the division be based on how much money each person invests? What happens if one of you is putting in more time and effort? Will fees and realtor costs be split evenly? This is an important conversation that will help you put a plan in place. 

Who Should Be in Charge of What?

Partnerships can be organized in many different ways. Although it may seem ideal to have each person completely involved in every decision, this is rarely easy to accomplish. 

Some of the most successful partnerships are built on mutual trust that allows each individual to act on behalf of the other person. Whether you’re on vacation or tied up with other business ventures, it’s helpful to have someone who can act in your interest if need be. 

Discuss the ideal landscape of your partnership and whether certain tasks can be delegated. Who will conduct property research? Will someone be in charge of coordinating with the investment real estate agent you choose to work with? Develop a plan for your individual responsibilities from the outset.

What Happens If Things Aren’t Going as Planned?

Even with the best intentions, some partnerships don’t go as planned. In the ideal scenario, this is a mutual revelation that leads to an amicable parting of ways. Discuss the possible scenario of one or both parties wanting to dissolve the partnership. This conversation may be difficult, but it could help you prevent drama and turmoil in the future.

 

Screen Shot 2021 12 28 At 113128 AmLuke Babich is the Co-Founder of Clever Real Estate, a real estate education platform committed to helping home buyers, sellers and investors make smarter financial decisions. Luke is a licensed real estate agent in the State of Missouri and his research and insights have been featured on BiggerPockets, Inman, the LA Times, and more. 

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